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Seller's market drives up housing prices
Intense demand, low supply creates extreme conditions: Royal LePage
Eric Beauchesne
The Ottawa Citizen
Tuesday, April 02, 2002
ADVERTISEMENT
It's been a seller's market for homes so far this year, driving up prices sharply, according to an analysis by a major real estate firm that's forecasting homes will remain a hot commodity until mid-year at least.
Intense demand and low supply created extreme market conditions, which caused an increase in the average Canadian house price in the first quarter of 2002 compared to the first quarter of 2001, Royal LePage says.
Heightened activity in the first quarter was rampant across the country, as low interest rates and mild winter weather encouraged buyers into the market, it said.
The unexpected buying resulted in demand often outpacing supply, leading to bidding wars for homes, it said.
In the 80 local markets surveyed, 94.7 per cent of detached bungalows, 93.4 per cent of standard two-storey homes and 91.8 per cent of standard condominiums increased in value from the first quarter of last year, it said. In Ottawa, low inventory caused property values to increase. The price of a two-storey home increased 9.5 per cent to $212,240, of a bungalow 8.6 per cent to $194,166, and a condominium 17 per cent to $122,641.
Countrywide, the average value of a detached bungalow rose 8.06 per cent to $208,773, a standard two-storey home 8.5 per cent to $233,962 and a standard condominium 10.4 per cent to $135,795.
"Sellers are in an advantageous position right now," it stated. "The outlook for second quarter 2002 is expected to be similar to the robust activity experienced in first quarter as mortgage rates are expected to remain at attractive levels, though inventory should slightly replenish, thereby alleviating some pent-up demand."
Ted Carmichael, an economist at J.P. Morgan Canada, noted that housing prices are rising at their fastest pace since 1991.
Although the current increase in home prices is still only half the pace of the boom in the late Eighties, that boom turned to a near decade-long bust.
"The 1990s were not a good decade for housing," said Mr. Carmichael, noting that it took until mid-1999 for housing prices to return to their 1989 levels.
"Mild winter weather undoubtedly boosted recent activity levels, but demand appears to be strong and is likely to prove durable, according to housing economists and industry officials," he said.
The Royal LePage analysis is a continuation of the upbeat economic reports being emitted by both the U.S. and Canadian economies.
In the U.S., the Commerce Department reported that construction activity increased in February for the third consecutive month, posting its steepest gain in a year reflecting strong demand there as well for new homes.
And in March, U.S. manufacturing activity increased for the second straight month, suggesting the recovery in that key, but still depressed, sector is continuing.
"Today's numbers add to the mounting evidence that the manufacturing sector is well along the recovery trail," said TD Bank economist Sheryl King. "The sector is in for better times in the months ahead."
:flaming: :flaming: :flaming:
Intense demand, low supply creates extreme conditions: Royal LePage
Eric Beauchesne
The Ottawa Citizen
Tuesday, April 02, 2002
ADVERTISEMENT
It's been a seller's market for homes so far this year, driving up prices sharply, according to an analysis by a major real estate firm that's forecasting homes will remain a hot commodity until mid-year at least.
Intense demand and low supply created extreme market conditions, which caused an increase in the average Canadian house price in the first quarter of 2002 compared to the first quarter of 2001, Royal LePage says.
Heightened activity in the first quarter was rampant across the country, as low interest rates and mild winter weather encouraged buyers into the market, it said.
The unexpected buying resulted in demand often outpacing supply, leading to bidding wars for homes, it said.
In the 80 local markets surveyed, 94.7 per cent of detached bungalows, 93.4 per cent of standard two-storey homes and 91.8 per cent of standard condominiums increased in value from the first quarter of last year, it said. In Ottawa, low inventory caused property values to increase. The price of a two-storey home increased 9.5 per cent to $212,240, of a bungalow 8.6 per cent to $194,166, and a condominium 17 per cent to $122,641.
Countrywide, the average value of a detached bungalow rose 8.06 per cent to $208,773, a standard two-storey home 8.5 per cent to $233,962 and a standard condominium 10.4 per cent to $135,795.
"Sellers are in an advantageous position right now," it stated. "The outlook for second quarter 2002 is expected to be similar to the robust activity experienced in first quarter as mortgage rates are expected to remain at attractive levels, though inventory should slightly replenish, thereby alleviating some pent-up demand."
Ted Carmichael, an economist at J.P. Morgan Canada, noted that housing prices are rising at their fastest pace since 1991.
Although the current increase in home prices is still only half the pace of the boom in the late Eighties, that boom turned to a near decade-long bust.
"The 1990s were not a good decade for housing," said Mr. Carmichael, noting that it took until mid-1999 for housing prices to return to their 1989 levels.
"Mild winter weather undoubtedly boosted recent activity levels, but demand appears to be strong and is likely to prove durable, according to housing economists and industry officials," he said.
The Royal LePage analysis is a continuation of the upbeat economic reports being emitted by both the U.S. and Canadian economies.
In the U.S., the Commerce Department reported that construction activity increased in February for the third consecutive month, posting its steepest gain in a year reflecting strong demand there as well for new homes.
And in March, U.S. manufacturing activity increased for the second straight month, suggesting the recovery in that key, but still depressed, sector is continuing.
"Today's numbers add to the mounting evidence that the manufacturing sector is well along the recovery trail," said TD Bank economist Sheryl King. "The sector is in for better times in the months ahead."
:flaming: :flaming: :flaming:
