In recent years, there have been significant changes in local housing market conditions that have had an effect on house prices. For example, house prices decreased by about 11 per cent from the peak of the fourth quarter of 2007 to the trough of the fourth quarter of 2008.
In 2009, the combination of an improving economy and very low mortgage rates led to a rebound and, as a result, the MLS® seasonally adjusted house price increased from mid-2010 to early 2011. From May 2011 to February 2013, however, housing prices remained relatively constant, due to more balanced market conditions. April and May saw slight month-to-month decreases of 0.3 per cent and 0.2 per cent, respectively, while June and July experienced increases of 2.0 and 1.9 per cent.
This recent experience demonstrates how, in the short and medium term, changes in the economic and financial fundamentals that support the housing market have an impact on house prices. Low mortgage rates, employment and income growth can all increase demand for homeownership and put upward pressure on house prices. Conversely, house prices can be subject to downward pressure during periods of economic uncertainty, either domestically or externally.
Overall, the resale market has been in balanced market conditions since the beginning of 2011. Balance is determined by the number of home sales relative to the number of new listings in a given period. Moving forward, balanced market conditions are expected to prevail in most local markets and the average MLS® price is anticipated to grow roughly in line with inflation in 2013 and 2014.
Click here to read full article