Real Estate Forecast 2006

The New Year is upon us and many Canadian homebuyers and sellers are wondering what it holds in store for real estate. According to industry sources, 2006 is shaping up to be another great year.

Some of the major factors that helped fuel a hot real estate market in recent years are expected to continue. Despite modest increases, mortgages will still be offered at some of the most attractive lending rates seen in years. Even though properties will continue to command high prices, the actual cost to carry a home will still be quite affordable compared to renting - a key factor in driving the market. There is considerable momentum in the market right now, as we wrap up what has been a record-breaking year for real estate nationally and in almost every major urban center across the country. In fact, the Canadian Real Estate Association (CREA) predicts that when year-end stats are finalized, the average MLS home price in Canada will be $256,200 for 2005, up 13.2% from 2004, shattering all previous records. This marks the biggest annual increase since 1989 and the seventh consecutive annual record in house prices.
We saw some modest interest rate increases in 2005 and this trend is expected to continue in 2006. What is anticipated to be a gradual rise in interest rates may cool consumer demand somewhat, as the cost of lending increases. However, while it may take a little longer for houses to sell, house prices are still expected to make further gains in 2006. CREA predicts that although the number of sales will gradually trend lower, the annual MLS average home price will increase by a further 5% to $269,000 nationally in 2006.

CREA's market forecast is supported by statistics released by the Canada Mortgage and Housing Corporation (CMHC). According to CMHC, new housing starts continue to boom with November starts representing thirty consecutive months surpassing the 200,000 level. CHMC predicts existing home sales for 2006 at 478,000 units and home values to increase by almost 5% in 2006.

According to these expert industry sources, you should not expect to see the same kind of double-digit increases in value that characterized the record-setting markets of recent years. We will move towards a calmer, more moderate market, where there is a good amount of inventory in the market for buyers to choose from, and sellers can expect to see moderate gains in value.

We'll be moving into a solid, stable market for 2006, and that's good news for both buyers and sellers. Why not contact your local Coldwell Banker real estate professional and get some further insights on your own local market.

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