Housing prices are on the rise in Thunder Bay, but incomes seem to be climbing rapidly enough to absorb the cost difference.
According to figures released this week by Canada Mortgage and Housing Corporation, the average home is being sold for $199,642 in the first quarter of 2013, an increase of 14.2 per cent over 2012. It all adds up to a seller’s market, says CMHC market analyst Warren Philp.
“There’s a limited number of listings, there’s still reasonable demand in the marketplace, and that’s driving prices up,” Philp said.
Listings for the first quarter were down over a year ago, with 159 on the market in March 2013, compared to 171 in 2012.
Those are historic lows, Philp said.
“That’s a critical element to this situation where prices are strong,” he said. “It supply related to demand. Demand is reasonably good, but supply is relatively weak, so prices are going up strongly.”
The good news for buyers is that fewer homes are selling at or above the listed price. In the first three months of the year, only 37 per cent of sales came in at or above the asking price, down six percentage points from 2012.
But sellers aren’t giving in too much. The remainder of homes sold averaged 98.9 per cent of the asking price.
Can the market sustain double digit price increases?
Philp said the market remains strong and CMHC is predicting it’s only going to pick up now that winter appears to have left the city.
Income is playing a role, he added.
Ontario average weekly earnings increases are stuck at 0.7 per cent, about a third of the national rate. But in Thunder Bay incomes are up 8.1 per cent, after four years of strong growth.
“That’s important when we see double-digit price increases for houses, because what pays for houses – incomes.
“For house prices to be moving in the double-digit territory, you’d hope that earnings are doing better than inflation. And certainly they seem to be the last couple of years. Earnings are moving relatively strongly. And in fact now we are on par with the Ontario average weekly earning level and we are stronger than the national average in terms of income.”
Philp says the city is seeing good wage movement in both the goods-producing and service sectors, especially the latter in the professional and engineering category.
“I can’t help but believe that the activity that we’re seeing around the mining sector, especially the consultants, the engineers, the geologists, etc. that are supporting the preparation or the beginning of the mining boom in Northwestern Ontario is starting to take hold and we’re starting to see incomes in our community starting to reflect that.”