House prices forecast to fall 2.2% in 2010: CREA

A "demand-driven downturn" will drive house prices lower by the end of 2011, the association which represents the country’s 100,000 real estate agents said Wednesday.

In an updated market forecast, the Canadian Real Estate Association said the national average resale price will reach a record $325,400 by the end of this year, a gain of 1.6 per cent from current levels. And while most markets are expected to post "modest" price gains in 2011, lower prices in Ontario and British Columbia will drag the national average down by 2.2 per cent. Its January forecast called for a 1.5-per-cent decline.

"With interest rates soon expected to rise, Canada is widely believed to be entering a typical demand-driven downturn due to recent prices increases and rising interest rates," said the organization’s chief economist Gregory Klump. Tougher mortgage qualification rules and the threat of higher interest rates caused many buyers to jump into the market sooner than they may have otherwise, he said, effectively stealing sales from the second half of the year.

(Source: Globe & Mail)