Too early to tell if housing market softening


Some commentators have remarked that a correction has occurred in Winnipeg’s local market as a result of a drop in MLS® sales in September, especially for the first-time home buyers’ market ($150,000 to $250,000 price range), but it’s still too early to tell whether we’re in a period of transition leading to the market cooling off.
It was said by WinnipegREALTORS® in January that the market would be hard pressed to duplicate 2011’s year-over-year monthly increases in sales. Last year was only 12 sales shy of the best year ever in 2007. In addition, the second half of 2011 had impressive monthly sales results. As was said at the end of 2011, it was as if a long-distance runner just needed another 200 metres added on to the finish line in order to catch the race leader. 
As we head into the final quarter of the year, MLS® sales are still in a dead heat with the same period last year, and dollar volume has increased by five per cent increase, so it’s hard to start pronounce that Winnipeg’s market is falling into line with other markets across the country which are slowing down. To prove this point, just taking a sneak peek at the first 15 days of October: sales were up six per cent and listings up a whopping 23 per cent. A rebound in October will keep 2012 on pace to break even with 2011 in sales, and ensure another annual dollar volume record for the 10th year in a row. 
Are we looking ahead with rose-coloured glasses? Definitely not. There is a point where prices do become a challenge for many buyers, despite historic low interest rates. 
The reduced amortization period from 30 to 25 years has been equated to a 100 basis point increase in interest rates, so it is affecting a number of home buyers. In particular, first-time buyers are in a tough position, since they do not have the benefit of building up equity in an existing home. 
The provincial land transfer tax is another burden. A two-per-cent tax is applied to any home valued at over $200,000 — the majority of sales in Winnipeg. The tax can amount to thousands of dollars paid up front before taking title to your new home.
Looking at MLS® areas where sales have fallen back somewhat this year, it is clear the majority of them are in more expensive neighbourhoods and areas in the city. 
As one veteran REALTOR®, Lynda Bowman, said at a recent meeting of independent real estate brokers: “If you are expecting to get more than $400,000 for your existing home, you better have kept up its maintenance as Winnipeg has very discerning buyers.”
While it may still be the case that sellers hold the upper hand in some locations and in the most active price ranges, buyers are asserting themselves more and gaining a foothold in keeping a lid on overall price increases for Winnipeg and the surrounding rural municipalities. Year-to-date average price increases for residential-detached properties or single-family homes sat at 5.4 per cent at the end of September. 
Over the past few years, we’ve learned that the local market is resilient and has held up quite well despite what has occcurred in other markets across Canada or globally. 
The new home market is exceeding expectations this year. It is one of only four markets in the country that the Conference Board of Canada has predicted will experience positive results for both the short and long term. Winnipeg was noted as having the biggest year-over-year increase in housing starts in September.
The local MLS® market has also been outperforming other resale markets, but it’s not immune to tighter mortgage regulations, up-front closing costs such as land transfer taxes and higher entry level prices for home purchases. As a result, it’s  highly unlikely at this stage that 2012 will be the strongest year on record. 
Next year is another story. Wait for the annual forecast in January 2013.  More of the same? We’ll see.