New report indicates lower housing inventory home buying factor

A new market report says low inventory is the only present hindrance facing home buyers in Winnipeg, but listings are expected to improve as the year progresses.

“Strong economic performance and soaring consumer confidence levels continue to buoy residential real estate in Winnipeg,” according to the latest RE/MAX Market Trends Report 2010.

WinnipegREALTORS® reported listings entered in February were down 2.5 per cent when compared to the same month in 2009, while year-to-date listings were down six per cent from the same period last year.

Peter Squire, the housing market analyst for WinnipegREALTORS®, said listings have certainly been under pressure, especially in specific neighbourhoods where  a sellers’ market exists.

“But overall,” he added, “we’re better off than we have been when it comes to listings.”

“Average price has responded to the upward pressure,” according to the RE/MAX report, “rising 12 per cent to $238,500 in January 2010, up from $213,000 one year ago.

“Inventory is especially tight in the $150,000 to $250,000 price range, where entry-level purchases are most active.”

The result of the low inventory is that multiple offers now dominate the market, the report indicated.

WinnipegREALTORS® reported MLS® sales rose nearly eight per cent in February to 712 units, which contributed to a dollar volume sales increase of 13 per cent to $253 million.

“You might say it is still too early in the game to get overly concerned,” said WinnipegREALTORS® president Claude Davis. “The next few months will show more of a trend on how the MLS® market will perform this year.”

The RE/MAX report indicated many home buyers are entering the market with the expectation mortgage rates will rise later in the year.

Statistics Canada reported Canada’s economy roared back to life in the fourth quarter last year, expanding by five per cent which was a greater than expected result. With the strength of the economy, some economists predicted a rise in interest rates, but the Bank of Canada announced on March 2 that it will be maintaining its benchmark interest rate at 0.5 per cent.

“The underlying factors driving Canada’s recovery are largely unchanged — policy stimulus, increasing confidence, improved financial conditions, global growth and higher terms of trade,” the bank reported.

The Bank of Canada is not overly concerned about a slight rise in inflation at this time, so its interest rate should remain at its current level until the second quarter of 2010.

“The bank judges that the main macroeconomic risks to the inflation projection are roughly balanced,” reported the bank.

“Luxury home sales (in Winnipeg) are brisk,” according to the RE/MAX report, “although few multiple offers take place in the upper price ranges.”

Squire said the highest price realized for a residential-detached home in February was $750,000, but upper-end houses remain on the market longer than entry-level homes.

According to the RE/MAX report, baby boomers are taking advantage of the current market conditions in Winnipeg to downsize, but “only in terms of square footage.”

The baby boomers are moving “into upscale condominium units that have sprung up in the south end, River Heights and St. Vital.

“Sales, in some cases, tripled since 2001 — as condominiums gain in popularity with both first-time buyers and baby boomers. In January, 53 per cent of  condominium sales occurred at the $150,000 to $250,000 price point.

“Numerous  condominium projects are currently underway, which will add to existing housing stock. Apartment block conversions will also serve to provide condominium units at the entry-level price point.” 

To make up for the conversions, Canada Mortgage and Housing Corporation said in its recent Housing Market Outlook, Prairie Highlights  that most multiple-family starts in 2010 will be units for rental tenure as persistently low vacancy rates encourage new rental construction.

CMHC expects demand for existing housing to remain robust in both 2010 and 2011.

It is predicting home price growth will  moderate slightly, increasing  approximately five per cent this year and 3.8 per cent next year.