Tag Archive for price increases

Laurin Jeffrey | February 21, 2011
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Home prices grew an average of 6.8% in last decade

By The Canadian Press

A new report says fewer real-estate listings led to higher home values in the last decade, with prices increasing at an average of 6.82% nationally.

The report by real estate agency Re/Max said either a seller’s market or conditions were balanced between sellers and buyers for most of the decade. The main exception was late 2008 and early 2009 when it was a buyer’s market.

Regina saw the highest price increases in the country between January 2000 and December 2010. Average price increases there had an annually compounded rate of return of 9.56%.

London-St. Thomas, Ont. saw the lowest increases at 4.82%.

Re/Max says the numbers show resiliency in the Canadian market in the wake of major events in the decade, such as the 9/11 terrorist attacks on Sept. 11, 2001, the SARS health crisis in 2003, forest fires, ice storms and the 2008-9 recession.

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Laurin Jeffrey | March 25, 2010
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Home prices to hit record this year

Canadian home prices will reach a record high this year, but those expecting the sky-high house price increases of the past decade to continue will be disappointed

By Eric Lam, Financial Post

Canadian home prices will reach a record high this year, but those expecting the sky-high house price increases of the past decade to continue will be disappointed, a Scotiabank real estate expert said Tuesday.

“It’s time to reset price expectations for the Canadian housing market,” Adrienne Warren, senior economist with Scotiabank, said at a real estate conference in downtown Toronto. “This was an exceptional decade for pricing.”

Looking at the past 50 years, prices on average rose between 2% and 2.5% each decade. But prices rose an average of 5.2% between 2000 and 2009, she said, which led to the current elevated pricing conditions.

“Some of that reflects a very strong global economy, a commodity boom, unemployment rates falling, all very positive for housing,” Ms. Warren said.

She added that some very lean years between 1990 and 1999 meant there was an element of “catching up” going on over the last decade. Average prices increases between 1990 and 2009 was slightly less than 2%, she said.

As for this year, Ms. Warren still anticipates a strong spring sales market as consumers try to take advantage of rock-bottom interest rates before an expected rate hike by the Bank of Canada in the summer.

Overall, she forecasts 10% growth in sales volumes to 510,000 transactions for 2010, just shy of record levels in 2007. Average prices will increase about 8% to a record $345,000, and housing starts will rise to 190,000 units, she said.

Starting midway through 2010 the market will likely start to slow down, a trend that will carry through to 2011 and beyond, she said.

“Next year we’re looking for somewhat lower sales volumes, somewhat lower prices, and lower housing starts,” Ms. Warren said.

Further ahead, the mortgage market will steady as there will be fewer new products to attract consumers. Also, home ownership levels will peak and start to trend downward beyond 2020 as the 40-64 Baby Boomer set move into retirement homes or condos, she said.

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Laurin Jeffrey | March 12, 2010
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Five warning signs of a bubble

It’s tough to spot an asset bubble until it pops. But here are five indicators in the housing market to watch

Tavia Grant – Globe and Mail

The trick with asset bubbles is you only know they were bubbles once they pop.

But there are warning signs.

With Canadian house prices approaching record highs, debate is heating up over whether Canada’s housing market is in one. So far, few economists say the market is in bubble territory – though they expect the sector will gradually lose some steam later this year.

One exception is Bank of Nova Scotia. “The country is in a price bubble,” economists Derek Holt and Karen Cordes said in a Tuesday note.

Here are five elements to watch in assessing whether a bubble is forming.

1. Affordability

Affordability is generally defined as the portion of pre-tax household income needed to service the costs of owning a home. And affordability is deteriorating as Canadian house prices rise. Homeownership costs rose in the third quarter of last year – the first gain in more than a year – as prices rose and mortgage rates inched higher, according to Royal Bank of Canada’s most recent quarterly report.

2. House prices

Sharp, sudden price increases can signal a problem. National house prices jumped 19% in December from a year earlier and are seen climbing another 5.4% to a record this year, the Canadian Real Estate Association says. Some of that percentage increase should be taken with a grain of salt though, as the comparison is with unusually low year-earlier activity, while big moves in some markets – such as Vancouver – skew the national average. Price increases on a weighted basis – which account for provincial proportions of privately owned housing stock – climbed 3.9% last year.

3. Delinquencies

Canada’s low rate of housing delinquencies underscores how different the situation is from the U.S. Arrears – or the portion of mortgage holders who have gone three or more straight months without making a payment – were 0.44% in November, according to Canadian Bankers Association statistics. It may seem a small portion, but is still the highest level in seven years.

4. Borrowing costs

Canada’s key lending rate remains at a record low of 0.25% and the Bank of Canada expects it will stay that way until the summer. The question is not whether rates will rise later this year, but how quickly. Any sudden increase in lending rates could see mortgage carrying costs balloon, putting additional burden on already strained household debt.

5. Regulations

Loose regulations have contributed to past bubble formations. In Canada, the heads of the country’s six largest banks are calling on the federal government to tighten rules around buying a house. Getting mortgage insurance from CMHC or one of its competitors requires a 5-per-cent down payment, and the maximum amortization period is 35 years. Finance Minister Jim Flaherty said this weekend he sees no signs of a housing bubble in Canada – though there are “some signals” that are concerning. “There are certain tools available to the government if we choose to use some or all of them,” he said.

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