Residential property prices set to fall in 2011 according to CREA

A recent memo from the chief economist of the Canadian Real Estate Association (CREA) explains the potential for housing prices to decrease in 2011. According to Gregory Klump's statement, residential property prices for 2011 will show a slight downward trend. CREA's chief economist is predicting prices to fall 1.3% after a rise of 3.1% this year. Klump feels sales numbers will continue to fall as weak economic prospects put downward pressure on demand despite the very low interst rates we are seeing now. He also feels that supply and demand for housing is stabilizing somewhat. This is good news for home buyers, of course, who will feel less rushed to make an offer than they may have in the seller's market of early 2010. It may also be good news for home sellers who may feel more confident about price stability now that we are in a balanced market. Klump also cites 'lacklustre economic and job growth and muted consumer confidence' as reasons for the weak results in July, August and September. He also feels consumer sentiment has to improve before we can see improvements in the market. I certainly agree with this. Doom and gloom seem to be on so many people's minds these days. Maybe all we need is a cheery disposition! Couldn't hurt!

CREA has a pretty good record in their predictions though they are not perfect. However, Ottawa buyers and sellers should also remain aware that we live in our own little world here in Ottawa. The large civil service keeps our little bubble from bursting.

Will the housing bubble burst?

I know that many potential home buyers actually want the "housing bubble" to burst. Maybe the artificially high housing prices in parts of Canada need to come down. However, according to a Royal Lepage house price survey it does not look like it is going to happen soon. Instead perhaps, some of those waiting for the bursting bubble have likely taken note of the very attractive interest rates and have chosen to become buyers.