MLS® home sales activity forecast revised upward

The Canadian Real Estate Association on Monday more than doubled its forecast for sales increases in 2007, the second time this year the association has revised its predictions upward. This is due to exceptional strength in Canada’s resale housing market in the first six months of the year.

The news comes amid a growing crisis in the U.S. housing market, with prices falling and the number of defaults rising. The situation helped create the meltdown of the U.S. subprime mortgage market, which made loans to high-risk people who are now unable to meet their financial commitments. The resulting investor unease spread from the subprime market to other areas of the American financial system and to markets worldwide, sending indices on a freefall last week.

National home sales are forecast to rise by 8.1 per cent to 523,100 units in 2007, and will set new annual records in most provinces. Activity is forecast to edge slightly lower in 2008, but will reach the second highest annual level on record in almost all provinces. Prices are forecast to set new records in every province this year and in 2008, but price increases will be smaller next year.

In British Columbia, CREA is forecasting that sales will increase 4.6 per cent over 2006, which is not something analysts expected.

CREA chief economist Gregory Klump says that “the housing market has caught everyone by surprise. Everyone expected a gradual cooling in the second quarter, but [the market] heated up instead.

“We’ve changed our forecast to reflect reality,” Klump said, adding the market has now seen two consecutive record-breaking quarters.

“Resale housing activity was a juggernaut in the second quarter of 2007.”

Next year, sales activity is forecast to edge slightly lower, but still reach the second-highest annual level on record in almost all provinces. CREA had initially called for sales activity to cool 2.8 per cent in 2008, but is now calling for only a two-per-cent decline.

Prices are also forecast to set records in every province this year and next, but price increases will be smaller in 2008, the association said. It is now looking for a 10.4-per-cent price increase for 2007, up from its previous forecast of 9.5 per cent. The price increase forecast of 5.5 per cent for 2008 has remained the same, Klump said.
RESIDENTIAL AVERAGE PRICE FORECAST

Annual percentage change:	2007(f)*	2008(f)
B.C.	+9.9%	+5.7%
Alberta	+24.6%	+6.6%
Sask.	+17.4%	+5.5%
Manitoba	+11.2%	+7.7%
Ontario	+8.6%	+4.8%
Quebec	+6.7%	+6.1%
Canada	+10.4%	+5.5%

RESIDENTIAL UNIT SALES FORECAST

Annual percentage change:	2007(f)	2008(f)
B.C.	+4.6%	-1.6%
Alberta	+5.6%	-4.5%
Sask.	+33.7%	-1.2%
Manitoba	+6.5%	-1.0%
Ontario	+8.2%	-1.5%
Quebec	+11.3%	-1.6%
Canada	+8.1%	-2.0%

* (f)=forecasts Source: CREA

MLS® Residential Unit Sales Forecast (Click on thumbnail for larger image)

MLS® Residential Average Price Forecast (Click on thumbnail for larger image)