The national media has been watching the real estate market closely to determine whether there might be a marked slowdown in activity. There has been widespread speculation that a market correction could occur due to the federal government’s recent tightening of mortgage regulations. The expectation has been that the changes to the mortgage rules will put a brake on housing demand.
The Canadian Real Estate Association (CREA) has observed that the national resale market has indeed softened, which has prompted the association to downgrade its sales forecast for this year and 2013. Based on August results, national sales were down 5.8 per cent from July, and 8.9 per cent below levels recorded in August 2011. In addition, listings were down 1.7 per cent. CREA’s economist Gregory Klump said these results provided the ”first clear indication that the recent changes to mortgage regulations aimed at cooling the market are working as intended.” The federal government shortened the amortization period for mortages from 30 years to 25 years. Declines were reported in two-thirds of all local markets, which represent 80 per cent of national sales activity. CREA president Wayne Moen cautioned that not all local markets behave similarly and noted that some markets are bucking the overall cooling trend. He specifically mentioned smaller and more affordable markets such as Winnipeg’s. Local sales were down from August 2011, but only by 3.8 per cent, and were still well ahead of the 10-year running average for August.
Winnipeg MLS® sales in August were also better than in July, while it was the other way around at the national level. Locally, new listings were down slightly, but were still better than in previous years with the exception of 2011.
When you look at a few other indicators, they clearly show Winnipeg is more the exception than the rule when it comes to following the national trend. For example, a national sales-to-new listings ratio of 51 per cent in August, which is well within balanced market territory, is starkly contrasted by Winnipeg’s 71 per cent sales-to-new listings ratio. Such a ratio indicates sellers’ market conditions.
Nationally, there was 6.5 months of inventory available at the end of August, but in Winnipeg there was only 2.7 months. The number of months of inventory represents the time it would take to sell out current inventory, based on projected rate of sales activity for the upcoming months.
Klump said first-time buyers may be affected the most as they invariably require a longer amortization period in order to afford a home purchase. With lower participation of first-time buyers in the market, as well as the fact they are so vital to furthering other sales in the market, they can precipitate a bigger decline than what may be normally expected.
While Winnipeg seems to be unaffected thus far by what CREA acknowledges as a moderating national resale market and as such has lowered its forecast for 2012 and 2013, we should not be so overconfident that our local market may not also be affected.
Even with CREA’s revised forecast for this year and next, the projections are on par with the 10-year average. If Winnipeg experiences some slowdown in the remaining four months of this year, it is important to keep in mind that the market is up against some of the best sales performances ever in recent years.
As of the end of August this year, Winnipeg REALTORS® sales and dollar volume for year-to-date activity were up two per cent and seven per cent, respectively, when compared to 2011. The previous year set a record dollar volume, with sales valued at over $3 billion for the first time in the history of WinnipegREALTORS®. In addition, sales fell just shy of the 2007 record when sales eclipsed 13,000 units.
Even within local markets, different factors are at play, so you should always seek advise from a REALTOR®, as he/she is a professional familiar with your market’s conditions.