Toronto Star article dated Mar 12, 09

VANCOUVER-Canada’s housing market is about half way through a cyclical downturn that began in late 2007, says the president and CEO of Royal LePage Real Estate Services.

“Starting back in the end of the third quarter of 2007 we saw unit sales peak in Canada and we’ve been in a downhill slope ever since,” said Royal LePage’s Phil Soper said Thursday in an interview

“We’re in the fifth quarter of correction now.”

Soper said he expects unit sales to flatten at the end of this year or in early 2010.

While the general public is focused on home prices, the real-estate industry concentrates on sales activity and revenues, he said

“With homes, (consumers) have a tendency to look at home prices because it hits them where they live and their personal financial health is tied up in their homes,” Soper said.

“To determine the health of the industry you need to look at industry revenues, which is determined by the number of homes that sell (multiplied by) the prices they sell at.”

He said unit sales are a leading indicator of price changes, so the slowdown in volume that began in late 2007 didn’t begin to be apparent in prices until last year.

Soper said the longest “contemporary correction” in Canada’s housing market lasted seven quarters, or 21 months, from 1989-90.

He believes the current correction will last only a bit longer and that there are many incentives in the market today to bring back buyers.

“When we look at year-over-year changes, and we look at how we believe the economy and the housing market will respond to the fiscal stimulus packages out there, to very low interest rates, to cheaper home prices, we think unit volumes will flatten on a year-over-year basis sometime in the third to fourth quarter” Soper said.

He said house prices may continue to decline after that time, but that there will be “positive unit price change prices,” later this year or early in 2010.

“Which will bring the overall industry into a growth stage again,” he said.

Soper also said first-time buyers will be the engine that drives Canada’s housing market in the months to come.

“When first-time buyers don’t buy, it’s really like sand in the gears of the real-estate market,” he said.

He pointed to estimates that first-time buyers represented 70 per cent of all real-estate transactions in Canada around the time the market peaked. That percentage has since dropped to about 40 per cent.

Soper’s comments come the day after rival real-estate firm ReMax released a report Wednesday saying first-timers are being lured into buying homes in recent weeks thanks to falling prices, lower interest rates, more selection and new government incentives.

Ottawa recently announced new tax credits of up to $1,350 for home buyers to renovate their house or cottage. It also increased the amount first-time home buyers can withdraw from their RRSPs from $20,000 to $25,000, and implemented a tax credit for first-timers of up to $750 to help cover closing costs.

ReMax said 22 of the 32 markets in the survey, or 69 per cent, “remain firmly in buyer’s market territory.”

Scotiabank economist Adrienne Warren said there was a 17 per cent drop in unit sales across Canada in 2008, compared to 2007.

In 2007, a record approximately 524,000 units sold, which dropped to 434,000 in 2008.

Based on January 2009 data, homes are selling at an annualized rate of about 317,000 in Canada.

However, January was considered a dismal month for home sales and early indications across Canadian real-estate boards show a significant pickup in many markets in February.

For instance, sales in Toronto rose 54 per cent in February to 4,120 units, compared to January. That’s still down from record 6,015 sales recorded in February 2008.

Official national figures for February are due to be released in the coming days.

Warren said Soper’s longer-term forecast is consistent with hers, but that current economic conditions will dictate when a recovery will come in housing.

“What you need to see is better demand conditions,” Warren said.