Home Sales and Home Values Drop in Same Month Across Nation

House sales have dropped in Ontario and in British Columbia, which have some wondering if the HST isn’t to blame. Brokers are claiming a staggering 46.7 per cent of their clients are still confused about how the HST affects homebuyers while an even higher 57.1 per cent of realtors say they get the same confused questions. The Toronto Real Estate Board announced home sales took a sharp tumble in July by 34 per cent, the lowest since 2002, selling 6,564 homes compared to the 9,967 homes that were sold in July 2009.

Toronto Real Estate Board president Bill Johnston said in a release, “The level of July sales remained below the expected long-term trend. The market has become more balanced following record monthly sales through most of the winter and early spring.” While the question remains as to whether the confusion over how the HST affects real estate transactions really is the culprit behind the decline in sale, Vancouver is also experiencing a comparable month. The Real Estate Board of Greater Vancouver announced it has seen sales drop by 45.2 per cent compared to July 2009 with only 2,255 homes being sold in July 2010.

A recent survey conducted by Royal Lepage found 43.9 per cent of realtors think the HST is a contributor in the decline of sales throughout the housing market. Phil Soper, president and chief executive of Royal LePage Real Estate Services, in Toronto said, “According to our realtors who work in B.C. and Ontario communities every day, misconceptions about the HST are having an effect on the market in both provinces.”

It seems the HST may be blamed for lower Canadian housing sales but across the border, foreclosures are being blamed for the drastic drop in sales. A study done by Harvard University has found that the overabundance of foreclosures have significantly reduced the value of homes by about 27 per cent across the nation. They have also noted that homes that are within 75 meters of a foreclosed home will have their valued decreased by about one per cent.

According to the U.S. Mortgage Bankers Association, approximately eight per cent or 4.3 million of Americans with a mortgage were behind by at least three payments as of March 2010 and were in foreclosure. The lead author John Campbell, the Morton L. and Carole S. Olshan professor of economics at Harvard, said in their release, “The losses on foreclosed homes proved to be much larger than we had expected.” They also found that if a home was sold after the homeowner went bankrupt, the price of the home would drop by about three percent, however, if the owner passed away, the home’s value dropped between five and seven per cent. It seems potential home buyers feel that homes that are in bankruptcies or foreclosures are more prone to vandalism and damage, making them less valuable.

(ArticlesBase SC #3040119)

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