TORONTO (Reuters) - Canadian resale home prices are likely to rise, not fall, and sales will nearly match those of last year, the Canadian Real Estate Association said in a revised forecast on Thursday.
A much stronger showing in the second quarter, and a solid start to the third quarter, prompted CREA to predict a dramatically smaller decline in sales of previously owned homes for 2009, and for prices to edge up.
It said the current resale market was like “night and day” compared with the beginning of the year.
The group said its new forecast for a 1.5 percent rise to C$309,500 ($283,945) for the average home price contrasts with a call for a 5.2 percent drop to C$287,700 in its May outlook.
CREA also revised its forecast for 2009 sales to 432,600 units, a 0.4 percent decline from 2008 when 434,477 units changed hands.
That is a much smaller retreat than the May forecast, when the association expected sales would drop 14.7 percent from 2008 -- itself a revision from a previous prediction of a 16.9 percent drop in sales.
“The recovery in Canadian housing I think was beyond the imagination of even the most strident optimist. It truly is remarkable and I think that revision just reflects it,” said Doug Porter, deputy chief economist at BMO Capital Markets.
The Canadian residential property market was hit hard in the final quarter of 2008 as the recession choked off demand, and accounted for more than half of the decline in transactions from 2007, the record high year. Sales tumbled 17.1 percent in 2008 from 2007.
The data from the last six months has increasingly shown that people are venturing back into the market. Low mortgage rates and signs that the worst of the economic slump is over are stimulating demand.
There has also been a turnaround in consumer sentiment, underscored by Thursday’s report from the Conference Board of Canada that showed confidence rose in August for the sixth straight month.
British Columbia and Ontario are now expected to see an annual increase in sales activity, while CREA cut its forecast declines for several provinces, including Alberta, Saskatchewan and Quebec.
Nearly all provinces are expected to see a higher average price this year, except Alberta, where the average is seen falling 4.4 percent. British Columbia is expected to be relatively stable with a 0.1 percent dip.
For 2010, the average price nationally is expected to rise 2.1 percent to C$315,900, while sales activity is seen gaining 5.3 percent to 455,400 units.
Editing by Rob Wilson