Sales expected to slow in new year

By Sunny Free­man The Cana­dian Press

Hous­ing mar­ket activ­ity has rebounded from a trough hit in July, but sales are expected to enter the new year at a more sub­dued pace that is closer to nor­mal than the revved up lev­els reported ear­lier this year.

The Cana­dian Real Estate Asso­ci­a­tion said Mon­day that sea­son­ally adjusted home sales on its Mul­ti­ple List­ing Ser­vice climbed 4.6% to 35,714 units in Octo­ber, fol­low­ing sim­i­lar increases in August and September.

“National sales activ­ity is now run­ning almost halfway between the highs and lows posted between late 2008 and late 2009,” said Gre­gory Klump, CREA’s chief economist.

“This sug­gests that the Cana­dian hous­ing mar­ket may be start­ing to nor­mal­ize. After the wild roller­coaster ride that many hous­ing mar­kets have been on, nor­mal and sta­ble mar­ket con­di­tions are some­thing that many buy­ers and sell­ers will likely welcome.”

Hous­ing mar­ket activ­ity now sits 13.3% above July lev­els — a low-point for the year when sales declined 30% from a peak in the final quar­ter of last year.

Still, sales activ­ity was 21.6% below the record lev­els reported last October.

Pas­cal Gau­thier, senior econ­o­mist at TD Eco­nom­ics said October’s fig­ures were indica­tive of a “soft land­ing” in the hous­ing market.

“The last three months of data sug­gest that a trough in resale hous­ing activ­ity may have formed ear­lier than we expected.”

Many Cana­di­ans had rushed into the hous­ing mar­ket dur­ing the sec­ond half of last year and the begin­ning of this year in advance of new mort­gage reg­u­la­tions in April, an expected increase in inter­est rates and a new sales tax regime that took effect in July in Ontario and B.C.

That had the effect of push­ing sales ahead into the end of 2009 and the begin­ning of 2010 that may have oth­er­wise taken place in the spring and sum­mer. It may also have lured buy­ers into pay­ing more for homes than they would have with­out the sense of urgency.

Year-over-year prices rose incre­men­tally in Octo­ber, fol­low­ing a brief dip in Sep­tem­ber. How­ever, they were up about three% from the month before.

Dou­glas Porter, deputy chief econ­o­mist at the Bank of Mon­treal, said the mar­ket is finally approach­ing some­thing closer to “nor­malcy” after wild swings in prices and activ­ity over the past three years.

“Sales are still down heav­ily from the pip­ing hot pace of a year ago, but they are close to aver­age lev­els since 2000,” he said.

“And, prices are up just slightly from a year ago, while the inven­tory of unsold homes is close to typ­i­cal. In other words, there’s not much here for either the wild-eyed opti­mists or the rant­ing pes­simists, which is prob­a­bly a good thing.”

Sales vol­umes for the first 10 months of the year are now down 2.6% from 2009′s pace, with B.C. expe­ri­enc­ing the biggest sales drop, fol­lowed by Alberta and Ontario.

The num­ber of new list­ings on the MLS edged up 1.3% in Octo­ber, still 14% below the recent peak reached in April 2010.

The num­ber of new list­ings is nor­mal­iz­ing to lev­els con­sis­tent with the reduc­tion in sales activ­ity, which has kept the mar­ket bal­anced since the spring.

Price increases are start­ing to level off as a cooler sales mar­ket becomes the new norm.

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