Housing market begins to cool
After a strong bounce-back, residential real estate is taking a breather. That may not be a bad thing.
Judging from the recently released May housing data, it looks like experts' predictions that the real estate market would slow during the second half of the year may be on target. Existing home sales, new listings and housing starts all slipped during May, and indications are that the trend will continue.
According to the Canadian Real Estate Association, or CREA, 37,576 homes traded hands on a seasonally adjusted basis during May, compared to 38,654 homes during May of last year. The average price of homes sold during the period rose by 8.5 per cent, compared to those sold during the same month last year, to $346,881. However, that percentage increase was significantly smaller than the 13.6 per cent year-to-date average.
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A combination of rising mortgage rates, changes to mortgage regulations and the July 1 implementation of the Harmonized Sales Tax, or HST, in Ontario and British Columbia (which pulled forward some sales into April that normally would have closed in May or later) are being blamed for the sluggishness. According to Adrienne Warren, of the Scotiabank Group, the figures provide further evidence that Canada's housing market has "lost momentum."
Unsurprisingly, the reduced demand also put a damper on homebuilders, as housing starts fell to 189,100 units in May, compared to 201,800 units during April.
Mixed economic factors suggest cooling-off period
While short-term factors are likely responsible for some of the month-to-month variations in housing data, more structural elements are also at play. The Canadian economy, for example, which had been growing steadily for seven straight months, came in flat during April. Retail sales, which had been climbing steadily since the beginning of last year, also tanked during April, falling 1.9 per cent.
The upside for many first time home buyers is home pricing now becomes affordable for many of them. This opens up huge market for realtors searching for new business. Targeting first time home buyers may be the best bang for your buck, increase gross commission returns, and minimize negative growth in the market place.