The Canadian Real Estate Association has raised its sales forecast for the rest of the year, calling for a smaller decline than it originally expected as low interest rates keep buyers in the market.
The association now expects sales to fall by 1.6 per cent in 2011, compared to its November call for a drop of almost 9 per cent. Prices are also expected to do better than forecast, with a gain of 1.3 per cent instead of a slight decline.
"The hand-off going into 2011, together with the highs and lows for sales activity posted in 2010, provided guidance for CREA's revised forecast," said chief economist Gregory Klump. "The announcement of the new changes to mortgage rules will likely bring forward some sales into the frost quarter that would otherwise have occurred later in the year."
For 2012, CREA expects sales to slightly outpace 2011 and prices to advance by another 1.3 per cent. The forecast is at odds with a recent report by Capital Economics, which said prices could fall by 25 per cent in the next three years as interest rates rise. Several Canadian banks raised their mortgage rates by 25 basis points yesterday.
"Even though mortgage interest rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity," Mr. Klump said. "Strengthening economic fundamentals will keep the housing market in balance, which will keep prices stable."