Real Estate Market To Cool Slightly

TORONTO, July 7, 2010 - Canada's residential real estate market will start to slow in the second half of 2010 after two quarters of strong price appreciation and sales activity, according to the Royal LePage House Price Survey and Market Survey Forecast released today. While market fundamentals remain strong across most major centres in Canada, sales activity was overly ‘front-loaded' in the first half of the year and is expected to cool off for the third and fourth quarters. Prices are also expected to steady in the second half of the year.

"We have seen an unusual pattern of activity in the housing market over the past 12 months, with the market experiencing a surge of activity and price increases that peaked in the fall of 2009 rather than spring.  Early 2010 has followed a more typical seasonal pattern with prices and activity peaking in the second quarter," said Phil Soper, president and chief executive, Royal LePage Real Estate Services. "An expected increase in the supply of homes on the market will now bring stabilization in prices and in some cities we will see both prices and unit sales decline towards the end of the year. This should not be interpreted as a severe correction but rather a natural reaction to the market having peaked quite early this year."

The surge of activity in the first and second quarters of 2010 corresponds to a number of significant regulatory and financial industry changes that affected home buyers over the same period, including an increase in interest rates in the spring, tightening of mortgage lending rules for first time homebuyers and investors, and the lead up to the introduction of the HST in British Columbia and Ontario.

"Anecdotal evidence suggests that these factors may have prompted an increase in housing market activity in early 2010, as people sought to get out ahead of the changes," Soper said. "Moving into the next six months, key economic indicators such as employment growth will continue to bolster consumer confidence and help to ensure a fundamentally healthy housing market. Home prices will remain flat or decline slightly in most cities, but will be more likely to hold their value or increase in energy-producing economies such as Alberta."

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