A new forecast by Central 1 Credit Union indicates housing prices in Ontario are likely to rise the most in the Northwest and in the Hamilton-Niagara area this year.

"Numbers in Hamilton have been largely positive lately, especially in price," said Helmut Pastrick, chief economist. "Certain market conditions have shown some improvement and we think that will continue."

Pastrick says actual home sales in Hamilton haven't risen significantly, but rising prices bode well for the market in this area.

That said, the fortunes of the housing market in southern Ontario are largely tied to the U.S. economy, he points out.

"In general, the market is going to be treading water," Pastrick said. "We need the economy to kick into high gear for significant [real estate] gains."

He says a real upswing in area sales is all predicated on the economic conditions in the U.S. "But if there are gains there, Hamilton will benefit from that upswing."

Federal efforts to curb household borrowing and tighten mortgage conditions will remain a drag on the market, the new forecast says.

The report says Ontario home sales have steadied at an annualized rate of 185,000 since September, following a six-month sales decline that pulled the sales pace down by more than 10 per cent.

"Fewer sales have led to softer prices, but declines have been insignificant," notes Pastrick.

The average MLS price was close to $384,000 in the fourth quarter, down less than 1 per cent from April and still about 3 per cent higher than in the same-period of 2011.

Other highlights from the report for Ontario as a whole include:

  • Home sales hit bottom late in 2012 and are expected to rise in 2013 
  • Home prices are predicted to be flat, rising 0.8 per cent in 2013 and 2 per cent in 2014 and 2015  
  • The number of real estate listings will likely drop as potential sellers wait for higher prices 
  • Mortgage rates are expected to remain low 
  • Outside Toronto the supply of new homes is not excessive 
  • Central 1 does not expect a glut of condos in Toronto 
  • Housing starts are forecast to decline 10.5 per cent in 2013 and remain stable in 2014 
  • Rental vacancy rates will likely remain low, although the number of units will grow  

As a whole, Pastrick says he's optimistic about the outlook for the housing market in Ontario.

"It's not an overly robust forecast, but I think there's more upside than not."