Homebuyers now have window of opportunity
October 31, 2009
From September 2008 to April of this year, the new home market was moribund. The lowrise (single-detached, semi-detached, townhome) market began picking up in May and has been on a roll ever since. And the highrise condo market finally came to life in September to join the lowrise rally.
According to RealNet Canada Inc., the Building Industry and Land Development Association's (BILD) official source of new home market intelligence, there were 3,883 new homes and condos sold in September of this year, which represents a 113 per cent increase over September 2008.
Admittedly, comparisons with last September have to be taken with a grain of salt, so I looked back to September 2007 to find that 3,972 units were sold that month.
After what we've been through, being that close to the 2007 number is quite remarkable.
Breaking the markets down by product, sales of new lowrise homes were up 134 per cent in September and they are up 21 per cent through the first nine months of this year versus 2008.
Lowrise sales have accounted for 60 per cent of the market so far this year, compared with 45 per cent last year.
Meanwhile, sales of highrise condo suites finally broke out of a yearlong slump in September, rising 95 per cent. On a year to date basis, highrise sales are down 31 per cent, and that's a number I expect to see shrink during the last quarter of 2009, based on positive reports from the new project openings as well as some re-launches.
All in all, new home sales are off last year's pace by just 7 per cent through the first nine months of the year and I would expect the final quarter to narrow that gap completely, given today's dramatically different economic circumstances.
Of course, it's easy to predict to the end of the year when there's only two months left, but what's the market outlook for next year and beyond? We asked that of Frank Clayton, executive VP, economic consulting with the Altus Group and economic advisor to BILD.
Speaking to a large industry audience in mid-October, Clayton focused on the dramatic comeback of lowrise new home sales.
He said that home builders lost share to the resale market because prices got "out of whack" and they are regaining market share because they have become extremely competitive in spite of government-imposed costs, which he flagged as "one of the industry's biggest problems."
"Right now, confidence is phenomenal, affordability is great and demographics are in our favour," said Clayton.
Speaking at the same dinner, Craig Wright, chief economist, RBC Financial Group described the recession as relatively short and relatively shallow in expressing a "cautiously optimistic" market outlook.
Wright noted the Bank of Canada's commitment to hold its interest rate at the current rock-bottom level through the first half of next year, but said rates would jump by a full percentage point at that time.
Frankly, all economists are predicting interest rates to rise next summer, which means that homebuyers have a great window of opportunity now.
The combination of very competitive new home prices and five year discounted rates below 4.5 per cent makes housing affordability optimal at this time, and based on September's sales, homebuyers know it.
Stephen Dupuis is president and CEO of the Building Industry and Land DevelopmentAssociation. The views expressed are those of the president. Email: president@bildgta.ca.
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