Housing Market Experience Soft Landing.

by MBN | 06 Dec 2013

The housing market is expected to experience a soft landing, as opposed to a hard correction, the Bank of Canada announced in its monthly overnight rate announcement this week.

“The housing sector has been stronger than expected but is consistent with updated demographic data and a pulling forward of home purchases in light of favourable financing conditions,” the report stated. “The Bank continues to expect a soft landing in the housing market.”

The Bank of Canada also announced its newest overnight rate Wednesday and… surprise… they have chosen to hold it steady at one per cent, once again.

“Overall, the balance of risks remains within the zone articulated in October,” the report stated. “Weighing these considerations, the Bank judges that the substantial monetary policy stimulus currently in place remains appropriate and therefore has decided to maintain the target for the overnight rate at 1 per cent.”

The overnight rate has, of course, remained at one per cent for over three years with the Bank of Canada choosing to refrain from interfering. The announced rate bodes well for those homebuyers currently holding a variable-rate mortgage.

GDP growth, meanwhile, was stronger than initial projections.

“In Canada, underlying growth is broadly in line with the Bank’s projections in its October and July Monetary Policy Reports,” the report stated. “Real GDP growth in the third quarter, at 2.7 per cent, was stronger than the Bank was projecting, but its composition does not yet indicate a rebalancing towards exports and investment.”

BCREA ECONOMICS NOW

Bank of Canada Interest Rate Announcement – December 4, 2013

The Bank of Canada once again opted to maintain its target for the overnight rate at 1 per cent. In its accompanying statement, the Bank highlighted that inflation continues to move below the Bank’s 2 per cent target due to significant excess supply in the Canadian economy. It also noted that the risks to inflation appear to be to the downside, meaning it sees the risk of continued below target inflation as a more likely outcome than a rise in inflation. This, along with the Bank’s expectation of a “soft landing” in the Canadian housing market, suggest that monetary policy will remain highly accommodative.

The Bank of Canada is currently projecting that excess supply in the Canadian economy will be eliminated sometime in mid-2015. Keeping in mind that the Bank has spent the past several years pushing that date back, if the Canadian economy does accelerate as most expect in 2014, a gradual rise in short-term interest rates will follow. Importantly, an uptick in Canadian economic growth next year will most likely be the result of stronger external demand, particularly from a resurgent United States.  However, stronger growth in the US economy will also put upward pressure on long-term yields, lessening some of the urgency for monetary tightening. For that reason, we expect that eventual Bank of Canada tightening will occur very slowly, beginning with a 25 to 50 basis point increase in the overnight rate in 2015.

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Real estate boards, real estate associations and REALTORS® may reprint this content, provided that credit is given to BCREA by including the following statement: “Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information.

News Release: December 3, 2013

FRASER VALLEY’S HOUSING MARKET COOLS IN NOVEMBER   

(Surrey, BC) – The Fraser Valley Real Estate Board’s Multiple Listing Service® (MLS®)  recorded 986 property sales in November, an increase of 9 per cent compared to the 905 sales during the same month last year, however a decrease of 21 per cent compared to October’s 1,249 sales.

Month-over-month, the Board also received 24 per cent fewer new listings – 1,774 compared to 2,336 in October – but still an improvement over the 1,723 new listings received during November of 2012.

Ron Todson, president of the Board says, “We typically see a slowdown just before the holidays and this year it started a little sooner reflecting what we’re seeing in our overall economy.

“Similar to last November, sales are hovering at about 14 per cent off normal levels, but so are new listings. They’re down about 7 per cent compared to the 10-year average, so what we’re seeing is a slower but steady market keeping home prices in check and the average number of days to sale stable.”

For a detached home in the Fraser Valley, the average number of days to sell in November was 57, compared to last year’s 59 days. For townhomes, it was 58 days and apartments 78 compared to 70 and 74 in November 2012.

Prices for benchmark homes also remain steady showing nominal year-over-year increases or single-digit decreases. For single family detached homes, the benchmark price increased by 1.0 per cent in one year, going from $544,700 in November 2012 to $550,300 last month.

For townhouses, the benchmark price in November was $292,400, a decrease of 2.2 per cent compared to $298,900 during the same month last year. The benchmark price of apartments in the Fraser Valley in November was $196,200, a decrease of 3.3 per cent compared to $202,800 in November 2012.

Todson notes, “Those thinking of buying or selling may notice in our monthly statistics package that average prices in November are up or down substantially compared to the benchmark price.

“Talk to your REALTOR® who will explain that the volume of sales and the calibre of homes sold can dramatically skew average prices, which doesn’t happen with the benchmark price the most reliable of all pricing measurements.” 

Since November 2012, the benchmark price in the Fraser Valley for all three residential property types combined is flat, having decreased by 0.4 per cent and over the last six months the price has decreased by 0.9 per cent.

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The Fraser Valley Real Estate Board is an association of 2,778 real estate professionals who live and work in the BC communities of North Delta, Surrey, White Rock, Langley, Abbotsford, and Mission.  The FVREB marked its 90-year anniversary in 2011.

Full package:

http://www.fvreb.bc.ca/statistics/Package%20201311.pdf

Last modified on Thursday, 28 November 2013 04:51