U.S. Real Estate Woes Continue

While the overall Canadian real estate market including activity locally showed renewed strength in the final quarter of 2009, the same cannot be said for our neighbours in the U.S.
The U.S. economy continues to struggle its way towards a recovery and has yet to generate any traction in the all important area of job creation. Many Americans even those with conventional low risk mortgages are under the threat of losing their homes in the next year or two the result of being unemployed. This has now spilled over into the two other segments of the U.S. real estate market as well.
The commercial real estate market is under great threat of collapse. As tenants go bankrupt, out of business or just start to close unprofitable retail locations etc. many investors with significant holdings in commercial real estate are going to incur massive losses. PriceWaterhouseCoopers believe that 2010 will be the worst time in 30 years for commercial property investors in the U.S. to sell their holdings. The question on every one's mind is what impact this will have on the housing market?
In short, this creates the potential for bad news in the luxury residential market. Investors, brokers, builder/developers, tenants and others that are engaged in some aspect of the commercial real estate market are often the buyers and sellers of luxury homes as well. If he commercial real estate market suffers any significant fallout stemming from the ongoing recession being experienced in the U.S. the luxury home market will be sure to take a hit as well.

4th Quarter 2009 Real Estate Sales Increase 101%

Real estate sales across southern Georgian Bay rebounded strongly in the second half of 2009 particularly during the 4th quarter which saw sales more than double over the 4th quarter of 2008.

Following a lackluster start to 2009 which saw 1st quarter sales decline 47% from the first quarter of 2008, low interest rates, strong consumer confidence and an abundance of properties listed for sale all contributed to fuel increased sales activity during the balance of 2009. As a result, total sales revenue for the year exceeded 2008 by 10% totaling $484.7 million while unit sales rose 8% to 1,857 individual properties sold.

Single family MLS® home sales across the area increased a respectable 4.6% during 2009 with 1,195 homes changing hands. Surprising strength was shown in the condominium market which saw unit sales increase by 22% from 266 units in 2008 to 324 sales in 2009. Neither of the aforementioned results include the sales of new homes and condos made by developers that were not listed on the MLS® system of the Georgian Triangle Real Estate Board.

Of particular note during the latter half of 2009 was the renewed strength shown in the upper-end of the market. Sales above $500,000 for the year increased by 12% to 125 properties compared to 107 in 2008. More significantly, sales from $800,000 to $1 million totaled 15, an increase of 36% while sales over $1 million totaled 15 as well, also reflecting a 36% increase.

Unit sales for 2009 of 1,857 properties reflected an 8% gain over the 1,720 properties sold in 2008. The number of new listings that came on the market in 2009 totaled 5,875 down slightly (2%) from the 6,000 new listing that were recorded in 2008. Conversely, the number of expired listings increased by 6% to 3,112. This was the 5th consecutive year where the number of expired listings exceeded the number sold. Many sellers and/or their respective agents are not listing properties commensurate with current market values. The reduction in new listings relative to sales reflected more balanced market condtions which in turn helped to stabilize prices. Prices throughout the area have remained relatively constant with the average residential price actually increasing in 2009 by 2.4% to $285,785.

For a complete summary of market activity 2009 vs 2008, see my 4th Quarter Georgian Triangle Real Estate News.

2010 Real Estate Outlook

In a press release out today, Royal LePage Canada has issued their forecast for Canada's real estate market activity in the first half of 2010.
Given the market strength that was shown if the last quarter of 2009, all indications are for the momentum to continue during the first six months of 2010. What is unknown at this point here in Ontario, is the impact that the forthcoming harmonization of PST/GST will have as it will create added costs to both home sellers and buyers. Estimates are the average real estate transaction in Ontario will incur $1,400 to $1,500 in added taxes resulting in new taxes being applied to legal, appraisal and home inspection fees, real estate commissions etc.
As part of their 2010 market forecast, Royal LePage also issued their quarterly house price survey for the last quarter of 2009. Nationally, statistics show that house prices for bungalows and 2 storey homes rose at an annual rate of 6.04% and 5.2% respectively while standard condominium prices increased by an annual rate of 6.35%. Clicking on the above hyperlinks above will give you access to the two Royal LePage publications.
In my next posting I will recap the year-end results pertaining to local market activity here in the Georgian Triangle.