Why cooling housing market may precede a spring rush

By
Real Estate Agent with Sterling Real Estate

Canada's housing market remained vibrant in January, though showed signs of cooling from December. Year over year, resales rose 58 per cent in January, though from a depressed state a year earlier, the Canadian Real Estate Association said today, and prices rose almost 20 per cent, bringing the national average to $328,537. From a record-setting December, though, January sales dipped 2.8 per cent. That may be the calm before the storm. Analysts expect a hot spring real estate market given Finance Minister Jim Flaherty's move to tighten mortgage standards yesterday.

Even before Mr. Flaherty's announcement, home buyers had been expected to rush to beat the harmonized sales tax in Ontario and British Columbia. Now, there's added pressure for the spring with an expected rush to beat Mr. Flaherty's new qualifying standards that come into effect April 19. Economists project a spike in sales, and prices, followed by a cooling period. “The effect of the tightened mortgage rules will be to spur avoidance activity before the new rules become truly effective in July after the pipeline commitments on preapprovals burn off,” Scotia Capital economists Derek Holt and Karen Cordes said in a research note today. “That avoidance behaviour will also apply to the HST that dings new homes in Ontario and B.C. after Canada Day. Thus, look for a very strong spring market that transfers sales from [the second half of] 2010 and beyond into [the first half] of 2010 and drives house prices even further into record territory.”

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