The Royal LePage House Price Survey and Market Survey Forecast released today showed the average price of a home in Canada increased between 3.6 and 6.1 per cent in the fourth quarter of 2011, compared to the previous year. Royal LePage expects average price growth to continue through 2012 and predicts national average prices to increase by 2.8 per cent by the end of the year.
Despite calls in some quarters for Canadian house prices to soften in 2011, the market proved resilient as demand created by low interest rates and a relatively stable national economy created upward pricing pressure for all housing types surveyed. Further, recent high profile reports forecasting significant house price declines in 2012 are not supportable. Nationally, consumer confidence in the housing market was high in the fourth quarter as real estate brokers witnessed an unusually high quantity of multiple offer situations, including over the holiday season, compared to same period in previous years.
In the fourth quarter, standard two-storey homes rose 4.2 per cent year-over-year to $375,427, while detached bungalows increased 6.1 per cent to $344,392. Average prices for standard condominiums increased 3.6 per cent to $234,680.
“In the recovery period following the 2008-2009 recession, I found myself repeatedly speaking of ‘irrational exuberance’ in the Canadian housing market,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Expectations were too high and the pace of expansion unsupportable. With this report, I find myself in exactly the opposite position. Widespread calls for a major real estate correction in 2012 simply can’t be justified. The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand – albeit at a slower pace.”
House prices could very well increase, but that would mean in an increase of mortgage debt growth, at a time when income growth across the nation has slowed, which in turn, would also mean more tinkering with mortgage rules.What I find surprising is that none of these press releases mention the amount of mortgage debt growth in this last decade. Right now, mortgage credit is over $1.1 trillion, while by the middle of January, household credit will cross over $1.6 trillion. These debt loads have put Canadian households with a household debt to income of 153% and a household debt to GDP ration of 94%. Higher than those reckless borrowing Americans. Crazy!
How do these prices compare to years past?
"Continued healthy demand for homes in Saskatoon prompted average prices to rise in most areas in fourth quarter 2001 compared to fourth quarter 2000, though more modest demand was seen in Regina with minor fluctuations in house prices during the same period.
Based on the Saskatoon markets examined, the average price of a detached bungalow marginally increased to $131,375 (+2.5%), a standard two-storey home rose to $146,250 (+2.3%), and a standard condominium edged down to $87,500 (-0.6%), year-over-year."
It is truly amazing what lax lending, lower interest rates, explosive debt growth and a belief that real estate is the greatest investment ever, can do to a housing market in a decade.