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Economists optimistic recession is overThe outlook is brightening for the economy in general and the housing industry,specifically, according to some recent reports. The major banks and some of thelarger real estate franchises say the recession in Canada is either over or soonto be.RE/MAX Ontario-Atlantic issued a good news reports that existing home sales areup, with some markets moving into a seller’s market. And affordability has comedown toward more historical averages according to RBC Economics, puttinghomeownership back in reach for many.“Encouraged by recent government initiatives, home ownership in Ontario isbecoming a reality for an increasing number of younger purchasers,” says a recentreport by Royal LePage Real Estate Services. “Eighty-six per cent of potentialfirst-time buyers say low interest rates make them more likely to purchase a home;81 per cent cite lower housing prices as a motivating factor; while 76 per centcite job security and 64 per cent say a stable economy is an important factor intheir decision to buy.”Canada Mortgage and Housing Corporation (CMHC) is also predicting the worst of therecession is over and that housing markets will stabilize across the country in2010. “We are definitely seeing signs that the rate of economic retraction inCanada and worldwide is slowing,” says Ted Tsiakopoulos, CMHC Regional Economist.“However, Ontario is underperforming compared to the rest of the country duelargely to our ties with the United States. A sustainable Ontario economicrecovery will rely on improved US business and consumer spending and a pickup inprovincial exports which comprise a sizable share of Ontario’s GDP (gross domesticproduct).”In its third quarter Housing Market Outlook, CMHC is more bullish on newconstruction prospects for Ontario in 2010 than resale housing. “Sales in resalemarkets have overshot expectations in recent months,” says Tsiakopoulos. “New homebuilding is typically a lagging indicator that follows the resale trend so whilewe are expecting a cool down in resales, we believe new housing starts will rise.”Some of the reasons for the recent surge and expected decline in the resale marketinclude less demand as many prospective buyers rushed to get in before rates andprices rise. Even though the Bank of Canada has made a commitment to keep shortterm rates steady until spring, Tsiakopolous says bond yields which are tied tomortgage rates are poised to increase. “We will likely see a one-quarter to one-half percentage increase on five year rates,” he says.Another factor that will impact affordability over the next year, particularly atthe upper end of the market, is the introduction of the Harmonized Sales Tax. “TheHST will not only affect the cost of new housing, but also other real estateservices such as commission and legal fees.”For an average home priced at $302,354, OREA estimates that an HST could add$1449.00 in new taxes to closing costs. In Ontario, the HST could add an estimated$262 million in new taxes annually to residential resale real estate transactions.[1]Although many economists and industry leaders are overwhelmingly positive aboutthe economic prospects for the next year, not everyone is buying into theoptimism. Mortgage broker, David O’Gorman says, “I don’t like to be a pessimist,but I don’t see the rebound yet. Real estate has traditionally rebounded about 18months after the stock markets bottom out. If that holds true this time, we have arocky year ahead.”
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