As mortgage rates plummet to historic lows, some consumers may be wondering what's waiting for them in the usually frantic spring housing market.
"March through June is prime time in the real estate and mortgage markets," Robert McLister, editor of Canadian Mortgage Trends told CBC News in an email.
McLister said headline-making interest rates are encouraging some to buy early, but those numbers are not huge, at least at this point.
"The spring should be 'steady as she goes' unless the government tightens mortgage qualifications again, or rates spike. In either case, we could see a meaningful bulge in demand from people trying to beat those changes."
McLister is not alone in this prediction. Most experts seem to think the Canadian housing market will remain relatively stable for the foreseeable future.
According to the most recent Canadian Real Estate Association (CREA) forecast, national home sale activity for 2012 and 2013 is projected to remain roughly on par with the 10-year average for annual activity, because of low interest rates and the projected low economic growth.
"Interest rates aren't going to be low forever – but they're not going anywhere fast," Gregory Klump, CREA's chief economist, told CBC News.
Scotiabank Senior Economist and Real Estate Specialist Adrienne Warren echoed that sentiment earlier in March, at Scotiabank's 2012 Canadian Real Estate Outlook and Trends Forum.
"Home prices have leveled out over the past six months as market conditions become better balanced and as higher prices, tighter mortgage regulations and slowing job growth cool demand," she said.
"We expect sales and prices will be relatively flat in the year ahead."
The low rate debate
In the last CREA forecast, Klump called the continuation of low interest rates a "silver lining" in the face of what looked like a risky Canadian economic outlook.
But some experts say the low rates could be dangerous if consumers jump into the housing market and then find that interest rates, or their employment prospects, change.
"The general concern is interest rates are at historic lows both in nominal terms and to some extent in real terms," Tsuriel Somerville, a professor in real estate finance at the University of British Columbia told CBC News.
'Each region has its own economic dynamic, and that's stronger growth in the Prairies right now.' —Tsuriel Somerville, Real Estate Finance Professor
"The Bank of Canada has given signs that rates are going to rise and people feel that rates are going to rise – so there's a worry that people might take on debt that they can handle now, but might not be able to handle at higher interest rates."
"Fixed rates are still at eye-popping lows," McLister said, referring to the current four- and five-year mortgage interest rate at 2.99 per cent.
"Falling mortgage rates improve housing affordability, which draws more buyers out of the woodwork and allows people to pay more," he said. "That, in turn, leads to somewhat greater demand and stronger prices.
"If rates were to surge a few per cent, and incomes and employment didn't strengthen simultaneously, we'd see a rather unpleasant impact on prices."
Nonetheless, Klump says, the evidence is that people educate themselves very well before undertaking huge debt, lessening some of this worry.
"I'm hearing from our realtors that before people sign an offer they know what it is they can afford, they're not going out on the edge and grabbing more than they could afford long term."
Ontario, B.C., settling down
CREA said national resale housing activity should be around 458,800 units in 2012, representing an annual increase of 0.3 per cent compared to 457,305 sales in 2011. Higher demand in Alberta, Saskatchewan, and Nova Scotia is expected to offset softer activity in British Columbia, Ontario, and New Brunswick.
"Each region has its own economic dynamic, and that's stronger growth in the Prairies right now, certainly more than Ontario and, to a minor extent, B.C.," UBC's Somerville said.
"Both B.C. and Ontario, or the Toronto condo market and B.C., had a recent period of accelerated activity, and now there's a step back from that."
Klump agrees. He said sales activity in Ontario was trending up throughout 2011, alongside a spike in price in the second quarter, and CREA didn't see that as being sustainable.
"What you're looking at from a trends perspective is a pretty steady average price," Klump said. "The spike is why we have a decline in average price this year for Ontario."
Somerville said that while Ontario steps back from last year's accelerated real estate activity, the Prairies are still pushing ahead because of their strong resource economy.
"Ontario is much more about last year's activity and the condo market in Toronto, because overall it's been a weaker market than the Western markets because of the weaker economy," Somerville said.
"I think because Alberta – not only did they fall harder [in the 2008-09 recession] but they recovered more slowly on the price side – so you might see more price increases in Alberta than in the rest of Canada," he said.
Somerville also said B.C. is more likely to be in a bit of a decline compared to Central Canada, which is more likely to be in the low-growth stage.
He said that, as a general rule, a forecast rarely predicts extremes – and concedes that this spring does seem like it will include either modest growth or decline on a regional basis, without huge jumps either way.
In that framework, he said, Atlantic Canada can sometimes be harder to predict, because of construction and resource booms that haven't achieved any real consistency.
Despite the broad steady-as-she-goes consensus here about Canadian housing prices, there are still some who feel that much of Canada is on the brink of a bursting housing bubble, where prices will tumble dramatically.
Somerville is not one but he does acknowledge that these concerns won't likely go away anytime soon, for two main reasons.
"One is the recent history," he says. "Two is looking around and still seeing some dark clouds on the world economic horizon."