Real estate markets and the stock market are two of the biggest emotional stimuli for investors. When the markets go up, euphoria ensues. When the housing market crashes, panic and fear spread like an exploding dye pack in a stolen bag of money.
What are the forecasts and predictions for the Canadian real estate market in 2011?
CREA and Canadian Real Estate Forecasts for 2011
The Canadian Real Estate Association is one of the most sought after sources for housing and real estate predictions. This agency has a wide scope of activity and responsibility that allows it to calculate housing statistics better than some smaller associations.
CREA asserts that not all provinces will feel the effects of fluctuating real estate prices equally. Some provinces will have a more profound move in housing prices than others. Here is one of their predictions:
- In 2011, Canada will experience an overall decline of 0.9% in home prices
Simply put, if a home is worth $100,000, it will fall by an additional $900 of value in 2011. Again, in some areas the price of homes might actually increase while other areas might see prices fall two or three times this much.
What is another housing price forecast for 2011?
- The Canadian Real Estate Association expects a 7.3% decline in home sales
While the real estate prices might remain fairly stable, the buying activity is expected to slow down significantly. This means that homeowners in a panic to sell may have to drop their prices substantially in order to liquidate. Others may need to wait longer than in previous years to sell.
The drop-off in home sales comes from an anticipated slowing of economic growth along with a reduction in consumer spending. Less free floating capital means fewer large purchases.
2011 Forecast and Trend Prediction Variables
Of course, these predictions are based on some assumptions. This article dealt with 2010 housing market predictions and readers will be able to compare these with fact in the coming year.
Interest rates are expected to hike further as the economy improves. Already in July 2010 the Bank of Canada raised rates to 0.75%. While still at historical lows, any hike in interest rates have big effects on mortgage rates. If interest rates are raised too quickly, this will further dampen real estate prices. On the other hand, if the government decides to lower the rates once again, as unlikely as this may seem, then home sales might surge slightly.
Government and institutional lending policies will also affect real estate prices. Some point to credit being offered too freely as the impetus that led to the 2008 crash. As banks and governmental policies become increasingly strict, more people will be turned down for mortgages. At the very least these potential house buyers will need to choose from more modest homes if their mortgage is declined.
These are merely averages. If the lumber industry recovers, home sales in the interior of British Columbia may jump along with average house prices. If oil prices rocket to new highs then Alberta could be in a good position to experience a jump in the housing market.
Good Time to Buy a Home in Canada?
Timing the market perfectly is a difficult task. Often it is easier to look at one’s income and decide if the stability of personal finances are adequate to acquire a house for the long term. If not, there is no shame in renting or leasing until circumstances permit such a purchase. But trying to perfectly time a house purchase with the market is like trying to buy a stock at its lowest point before a rebound – very difficult indeed.
Perhaps the famous value stock picker Warren Buffett should release a report on his 2011 real estate market forecast or housing predictions and trends for the coming year in Canada.
References
Trading Economies, “Canada Interest Rate,” website accessed 05 August 2010, tradingeconomies.com.
QMI Agency, “CREA Lowers Home Sale Expectations,” 5 August 2010, Toronto Sun.
