Posted on December 13, 2010
Barrie’s economy on the mend, CMHC says
BARRIE - A real estate market slowdown that began this summer should continue through early 2011, the Canada Mortgage and Housing Corporation says.
In its quarterly housing market outlook, CMHC notes the first half of 2010 showed relatively strong home sales, as first-time buyers took advantage of low mortgage rates in late 2009 and early 2010. That market segment, however, began drying up in the summer.
“Many homebuyers purchased early in 2010 to avoid anticipated mortgage rate increases. This depleted pool of potential buyers explains the current slowdown in housing demand,” said CMHC market analyst Edgard Navarrete.
“This effect will dissipate in 2011. Consequently, with continued job growth, activity in both the new and resale market will pick up gradually in 2011.”
The CMHC forecasts the average price of a new single detached home in the Barrie area to grow by just over four per cent this year – but remain relatively flat in 2011. CMHC reports the average price of a single detached home rose 4.4 per cent, to $450,000, and forecasts a slight increase next year to $451,500. In 2007, the average single detached house price in Barrie was $329,505, which is higher than the average MLS listing, which sold for $277,000.
The city’s vacancy rate is the highest in years, at 3.9 per cent, and an average two-bedroom apartment rented for $975 in October.
This year, price increases exceed inflation primarily because of an increase in sales in higher price ranges. That was caused by repeat buyers taking advantage of lower mortgage rates to upgrade, and CMHC doesn’t see a repeat performance in 2011. Mortgage rates are anticipated to remain flat, with the one-year rate hovering around 2.7 to 3.7 per cent.
CMHC also expects both the resale and new-home segments of the market to cool through the winter, which will lead to slower price growth next year.
New housing starts are forecast to be lower through to March 2011, before beginning a gradual recovery. The government agency also anticipates the local economy to grow modestly, with
Consumers are still looking mostly for single detached homes, although row homes – like townhouses – had an unusually high share of starts between June and September.
Over the past several years, MLS sales peaked in 2007, with almost 5,000 units being sold. In 2008, sales dropped dramatically, to 4,000, and recovered slightly in 2009 and early this year, before dropping slightly in the quarter.
The CMHC also found the Barrie area economy is recovering after the downturn, especially for the 25-44 age group. The first-time buyer demographic is expected to grow again next year, so although employment growth will slow, the number of potential first-time buyers will rise again.
Leading the way in Barrie’s economic recovery is the service sector, especially business services, finance and health care.