After a slow start to the year, home sales in Windsor appear headed for a rebound after a strong May - when transactions jumped 14 per cent over the same period last year.

May's 577 sales mean residential sales so far this year are down 4.8 per cent from the same period in 2004.

A total of 2,179 homes were sold in the first five months of 2005, compared to 2,290 from January to May last year, according to statistics from the Windsor-Essex Real Estate Board (WEREB).

"Windsor is a strong residential and commercial real estate market," says WEREB president Goran Todorovic. "We'll continue to be as strong, if not stronger, than last year."

Goran Todorovic

Todorovic says Windsor is a sellers' market and the average price is up 3.9 per cent in the first five months of 2005 over last year. In May, the average selling price was $165,628, compared to $165,187 in May 2004.

"In 2004, the house that cost $157,748 is now selling for $163,938," he says. "Listings are at a steady increase and purchasers are out there buying with the low interest rates.

It continues to be a sellers' market."

Listings were up 3.4 per cent in May, with 1,001 homes on the market, WEREB statistics show. In May 2004, there were 968 homes listed in Windsor-Essex.

Although house sales have picked up, Canada Mortgage and Housing Corp. (CMHC) reports that Windsor-Essex experienced a 46-per-cent drop in new-home starts in May compared to May 2004.

The decline was 53.8 per cent within the Windsor city boundaries for May, while for the first five months of the year it was 50.6 per cent.

Margot Stevenson, CMHC's market analyst for Windsor, says the decline was expected given steady growth in recent years. "You have to keep in mind those numbers are coming off of stronger numbers the past two or three years."

The first five months of 2005 saw 304 building starts in Windsor - a big drop from 616 in the same period last year. "We're forecasting 20- to 25- per-cent fewer starts than in 2004," she says.

Stevenson says starts are down because the booming starter-home market is coming to a halt. "We've sort of been through the cycle of first-time homebuyers."

However, Mike Dinchik, executive officer of the Greater Windsor Home Builders Association, says he does not believe the first-time homebuyer market is finished.

"I wouldn't feel comfortable saying that everybody who would buy an entry-level house has done that already," Dinchik says.

"The Windsor-Essex County area has the third-highest per-capita immigration in Canada. That's a strong indicator of future markets. I think it takes them awhile to get into the housing industry."

Dinchik says the entry-level market is struggling and attributes the decline in home-building starts to higher costs and poor consumer confidence.

"I think people are getting sticker-shock from the increases in development charges, land costs, material costs and I think it's finally catching up," he says.

"The other thing is that people are tightening up a little bit from the standpoint of the Big 3 (General Motors, DaimlerChrysler and Ford) labour negotiations around the corner," Dinchik says. "Teachers have been negotiating their contracts as well. I think those things going on around the Windsor-Essex county area have put a little damper on consumer confidence."

Stevenson says the average price of a new house in Windsor-Essex is about $220,000, a significant premium above resale houses, which have an average price of about $166,000. Stevenson says the raised ranch is the most popular type of new home being built in Windsor-Essex.

It is also the most popular house on the resale market, Todorovic says. "For raised ranches, 107 units sold (in May) at an average price of $214,532."

"It's the most value for the dollar," Dinchik says.

"Having the basement lower level raised out of the ground about four feet offers a brighter living area rather than a full basement."

"There's no wasted space in a raised ranch," Todorovic says. "If you build one that's 1,400 sq. ft., you've got 1,400 sq. ft. up and 1,400 sq. ft. down."

David Major, who has lived in Windsor for three years, purchased a raised ranch home in May. "The style was attractive to us because it is a nice layout inside without a lot of stairs to climb. It has plenty of room for a new couple starting out," he says.

A 4.7-per-cent mortgage rate helped him make the decision to buy rather than rent, Major says.

"You can get a five-year rate for less than five per cent now," Stevenson says. "It's not going to get any better than that."

CMHC is forecasting that interest rates may increase by the end of 2005 and if that happens, Stevenson says home-buying and building patterns will change.

"It's hard to put a figure on the impact these rates have had on both the resale market, as well as new-home construction. If they raised interest rates, new construction would drop right off," she says.

"It would be fewer homes being built and the entry-level starter homes really drops off because those are the people most affected by an increase in interest rates," Stevenson says.

Todorovic, however, believes it will take a big jump in interest rates before it begins to hurt.

"I think we should be OK unless it goes over 7.5 or eight per cent. Then the market will slow down," he says. "As long as it doesn't go any higher, we're fine."

Todorovic also believes the resale and new-home market is strong, and will continue that way for the rest of the year, especially in the under-$200,000 range.

Stevenson says the year's results will be determined by how the local economy performs.

"It's a little iffy on whether things are going to pick up as strongly as they should. The auto sector is in limbo and the border-crossing issue still hasn't been resolved. But if those were settled positively, then I think you'll see significant growth in Windsor and the surrounding communities," she says.

(Dave Richie can be reached at richie@businessedge.ca)