Canadian housing markets have been aided by lower borrowing rates on a variety of home mortgage products. In a recently released report on the state of Canada’s housing markets, Scotiabank senior economist, Adrienne Warren, notes that “[a]fter a seasonally uncharacteristic spring and summer slump, Canadian home sales appear to be stabilizing at a new lower, but more sustainable, level.”
“The moderate pickup in housing demand is being aided by lower borrowing costs,” Ms. Warren writes. Anticipating the Bank of Canada’s October 19 announcement that it is leaving its overnight lending rate unchanged (after three consecutive rate hikes earlier this year “that led to a modest backup in variable mortgage rates”), Ms. Warren forecasts that “interest rates will stay lower for longer, underpinning steady housing demand through the fall, contingent on at least a modest pace of job growth.”
The number of active home sale listings fell for a third consecutive month in September, Ms. Warren reports, while the number of new listings increased only marginally. Taken together, this suggests “a fairly balanced national market,” she notes.
Given such a balanced market, Ms. Warren reports that “average prices are essentially flat,” as would be expected, with average prices up 0.2 percent on a month-over-month basis but down 0.2 percent on a year-over-year basis.
“Look for a flattish fall national market from a sales and pricing perspective,” Ms. Warren concludes, as “ultra low interest rates remain highly supportive for the interest-sensitive housing market, moderate economic growth and hiring, debt-leery households and high home prices will keep many buyers on the sidelines for now.”
The question remains, however, how long potential buyers will stay on the sidelines? With most analysts forecasting that today’s very low interest rates will remain at current levels into 2011, a stable housing market with low home mortgage rates is likely to carry forward into the spring sales season.
