Canada's Housing Bubble

Jul 09, 2010 Murray McNeill Winnipeg Free Press

ESCALATING house prices are forcing a growing number of first-time homebuyers to either postpone their purchases or alter their purchasing plans, industry officials said Thursday.

Winnipeg Realtors released its Multiple Listing Service (MLS) sales figures for June and they showed a 32 per cent decline from June last year in the number homes that sold for less than $200,000, the preferred price range for most first-time buyers.

It has local realtors worried.

"When we asked our... members this spring about the affordability of the current market, about 75 per cent of them said housing affordability is become more of an issue in finding homes buyers want," Winnipeg Realtors president Claude Davis said.

"Based on the significant drop-off in sales in the lower price ranges, first-time buyers have to be one of the key market segments our members are concerned about."

Davis and Peter Squire, the WR's residential market analyst, said the main problem is there are fewer homes available now for under $200,000.

Squire said the heart of the North End and the downtown are the only two areas in the city where the average selling price is less than $100,000. And Fort Rouge and old St. Vital are the only ones left with an average selling price of less than $200,000. Other areas like Norwood, St. Boniface, west Fort Garry and Riverview that were still below the $200,000 threshold last year are all above it now, Squire added.

Officials said three things seem to be happening as a result.

Davis said some first-time buyers who are determined to buy now end up buying a more expensive home.

Squire said a substantial increase in the sale of condominiums priced at between $150,000 and $200,000 suggests others are opting to buy a condo instead of a detached home.

Debbie Goodfellow, the WR's immediate past president, said still others are temporarily withdrawing from the market until they can save enough to buy a higher-priced home in the area they want.

Despite the sharp decline in sales of lower-priced homes, the WR still reported a record $329 million in sales last month. It was the highest June dollar volume on record and also the largest single-month dollar volume ever.

The association said it was the first time sales have topped the $300 million mark for three consecutive months. That was in spite of the fact unit sales were down four per cent from June last year -- 1,432 compared to 1,490.

On a year-to-date basis, unit sales were still running six per cent ahead of last year's pace after the first six months (6,452 compared to 6,096) and the dollar volume was 17 per cent higher ($1.45 billion compared to $1.24 billion).

Also Thursday, Statistics Canada issued its new housing price index for May. It showed that contractors' selling prices for new homes in Winnipeg were 4.8 per cent higher in May than in May 2009.

The largest year-over-year increase was recorded in Regina, which was up 7.4 per cent, followed by St. John's, up 6.2 per cent.

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Republished from the Winnipeg Free Press print edition July 9, 2010 B4