Affordable home mortgages have been an integral factor – along with more rigorously regulated banking and mortgage insurance industries – sustaining Canadian housing markets, even as housing sales have slowed and real estate listings have grown in the second half of 2010.
“Canadian home prices are still on the rise even as sales fall [and] demand peters out,” according to a new Conference Board of Canada study reported by the Globe and Mail.
While overall home sales have fallen by 25 percent, since peaking earlier this year (before the introduction of the Harmonized Sales Tax, as reported here), Conference Board associate director, Michael Burt, notes that this “hasn’t stopped houses from becoming more expensive, a trend that is likely to continue.” As a result, Mr. Burt , an expert in industrial economic trends, forecasts that overall housing affordability will continue to decline over during the next two years.”
In a period where interest rates remain at very low levels, and economic growth is moderate as the economy emerges from recession, Mr. Burt reports that, “(m)ost of the costs associated with home ownership, such as mortgage costs and insurance, are outstripping inflation and income growth.”
Meanwhile, with a growing inventory of existing homes on the market, home construction has slowed. With further slowing expected for the remainder of the year. “The slowdown,” according to the Conference Board study, “represents a shift to a more sustainable building pace rather than the beginning of a large correction in demand.”
“While performance in the Canadian housing market is weakening,” writes the Globe’s Sunny Freeman, “it is faring much better than the U.S. market where the past three months have been the worst on record for new home sales.”
With continuing affordable mortgages and a tighter financial regulatory structure that prevented the worst excesses exposed by the meltdown of the U.S. housing market, Canada’s housing market has proven to be much more robust than that in the U.S. With both new home construction and overall real estate markets slowing, the Globe reports that, “Many economists predict an accompanying deceleration of price increases, with some saying prices could begin to fall modestly by the end of the year.”
