How will the soaring 'loonie' affect the housing market?

Believe it or not, it was just five years ago that the Canadian dollar traded at below 62 cents American. Yet, on September 20 th , for the first time in over 31 years, the 'loonie' reached par with the U.S. greenback. Some analysts are even predicting that the Canadian dollar will surpass its U.S. counterpart before year-end. That may be great news for 'snowbirds' and cross-border shoppers, but how will the strong performance of the dollar affect Canada's housing market?

As most Canadians know, the national housing market has remained strong for a few years now. In fact, the latest forecast from the Canadian Real Estate Association (CREA) says resale housing sales and home prices are both on track to reach yet another annual record in 2007. The good news is , it's unlikely the rise of our Canadian dollar will alter this rosy forecast.

Housing activity – like just about everything else in the economy – is driven by supply and demand. In today's market, the demand for housing remains very high. And it's no wonder. Demand is up because the economy is performing well, consumer confidence is high, attitudes about future employment prospects are good and mortgage interest rates are expected to remain at affordable levels.

In fact, in response to our rising dollar, the CLC (Canadian Labour Congress), one of the country's largest Labour organizations, is calling on the Bank of Canada to reduce interest rates to stay competitive against the U.S. And, if interest rates go down, financing a home becomes more affordable.

Granted, the rise of our dollar also means that Canadian property is becoming increasingly less affordable for U.S. buyers. However, our neighbours to the south make up a relatively small proportion of the total homebuyers. The vast majority of buyers for Canadian property are Canadian citizens. For these domestic buyers, a strong economy – and the strong dollar that goes along with it – should continue to keep the market active. As to other foreign buyers, the Euro is now at an all-time high and our prices compare favourably against those of many European cities, so Canada remains a viable option for this buyer group.

Want more information about where home sales and prices in your local market may be heading? Contact your Coldwell Banker ® real estate professional and get some 'insider' information and good advice. You'll be glad you called us first!