Bank economists on 2014

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Bank economists are offering new forecasts for 2014 that may force brokers to check their optimism at the door – before entering the new year.

“With 11 months of data in, it is now becoming clearer that 2013 home resales in Canada will be quite flat relative to 2012, despite the significant swings that occurred during the year,” according to RBC economists. “We expect a little more than 453,000 units will be sold overall in 2013, essentially equalling the 2012 tally.

“Our projection for 2014 is similarly flat on an annual basis (we forecast 454,000 units sold), with in-year swings bound to occur once again.”

Several banks were quick to respond to CREA’s monthly report, which was released on Monday. In it, the association says it expects 475,000 homes to be sold in 2014 – slightly more than RBC’s forecast.

TD Bank, for its part, shares a similar view with its competitor, stating the housing outlook may not be as rosy as real estate agents think. Still, it will have its upside.

“Reduced housing affordability, thanks to higher mortgage rates, will prevent the housing market from taking off over the next few years,” TD Senior Economist Sonya Gulati said. “In turn, we expect the housing market to undergo a soft landing.”

Not to be left out, the Bank of Montreal weighed in on the near future in its report entitled “Silent Night for the Hard Landing Crowd” stating the rest of this year and next hold less than compelling news for  Canada’s housing market – at least as far as mortgages go.

“With total sales nudging up from a year ago in 2013 … we can only conclude that the reality of Canada’s housing market is much more boring than widely advertised,” said Douglas Porter, chief economist with BMO. “And, the moderation in national sales from the summer’s hot level suggests underlying conditions remain well behaved.

“Somewhat softer activity in recent months suggests that the recent pick-up in prices should also moderate in 2014.”

 

  • Lior, Mortgage Edge on 2013-12-19 8:35:47 AM

    As long as interest rates remain very low, the housing market will remain resilient. It is a very simple equation: consumers in the market, especially first time buyers, get concerned about missing the boat on low rates and get the down payment gifted from parents who are sitting on hundreds of thousands in home equity, which in turn keeps purchases going. The abundant supply of cheap money in the system empowers sellers and they feel more confident securing top dollar for their property. Given that we haven't really seen any dramatic decreases to housing prices around the GTA, it is safe to say that as long as rates remain low, the housing market will remain strong. This is not to say there are no headwinds. Once interest rates start to creep up and we return to more realistic pricing, then you can start worrying. This is not bound to happen in the immediate future. Yes, the Fed cut back QE by 10 billion a month but the US economy remains on steroids. It is unlikely that we will see a surge in interest rates for years to come. The only effect on the Canadian housing market will be even more stringent mortgage qualifying rules, and those may come a lot sooner than a 5-year fixed at 5%.

  • Ron Butler on 2013-12-19 9:28:17 AM

    I agree with almost everything Lior has said. There is a chance that there is simply too much upcoming hi-rise condo capacity and there will be some fallout in that space, but as far as single family properties are concerned, if rates stay low not much chance of price reversal next year.

  • Len Lane on 2013-12-19 10:25:45 AM

    Glad to see the banks being negative, we increased our business by 11% this year by digging deep and working every deal. Same will happen in 2014.

  • Paolo Di Petta | dipettamortgage.com on 2013-12-19 7:06:25 PM

    I half agree with what Lior says - low rates doesn't mean the housing market will "stay resilient". It may appear resilient, but all it's doing is delaying the inevitable and making the problem much worse.

    Without the monstrous appreciation we have enjoyed until now, people are going to reach the limits of their "affordability". Debt to income is still high, and there isn't room on the refi-train to offload that debt anymore.

    Next year is definitely going to be interesting...

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