CANADA - A friend of mine is trying to sell his condo near the CBC building in downtown Toronto. Its a hot desirable location, close to the downtown financial sector. Sadly he is not alone, a lot of people are trying to sell their condos downtown and there is not a lot of buyers this Spring.
Indeed stagnation seems to be the trend nationwide.
According to March price data from the Canadian Real Estate Association the average urban prices are up 4.3%, if you ignore the jet-propelled Vancouver market (up 13.4% and already way ahead the rest of the Canadian market).
In contrast Toronto is up 4.9% and Montreal is up 4.6% compared to last year. The problem however is that while prices soar, the rate of sales slow and cool down dramatically.
Douglas Porter, deputy chief economist at BMO Capital Markets, says that the housing market will continue to slow sales in 2011. While personal incomes may be up 5% compared to last year, household debts are also skyrocketing in Canada which means most people cannot afford to buy a new home.
Some analysts think that home price increases will slow further to a snail's pace or even stop entirely by late this year.
According to BMO Capital Markets the ratio of prices to incomes is about 14% higher than its long-run average, and therefore is "moderately overvalued." (Before the bubble burst in the USA in 2005 the ratio was 26%, or "highly overvalued".)
Even moderate overvaluation hurts home sales and market sustainable.
If interest rates go up it will hurt the market even more.
CIBC World Market and Royal Bank economist Robert Hogue also think the housing market will stall this year. Bad news for people wanting to buy or sell.
Here is a thought... if you are trying to sell a home or condo, maybe you should actually do the unthinkable...
LOWER YOUR PRICE!!!
In a February report on affordability across Canada, Royal Bank economists found a typical two-storey home in Vancouver cost $780,700, double the Canadian average. Such a home would have cost $342,600 in Montreal or $570,100 in Toronto.
In February Toronto did have one good news on the topic of sales... Condo sales in February hit an all-time high, shattering the previous record by a margin of 26% and sold 2,202 new condos. It was also the first time February condo sales beat the 2,000 mark.
When the housing market is too expensive there is often a jump in condo sales because they are more affordable. Sadly this only seems to have effected new condos. The Building Industry and Land Development Association says the number of condos sold, saw a 36% increase from last year.
The previous record was set back in 2002, long before the infamous housing bust of 2008.
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