Num­ber of homes sold, prices also surge as con­sumers flock to the mar­ket before new mort­gage require­ment and HST come into effect

Steve Ladu­ran­taye – Globe and Mail

The Cana­dian real estate mar­ket reignited in March, with the num­ber of new list­ings sky­rock­et­ing even as the num­ber of sales and aver­age prices crept toward all-time highs.

Feb­ru­ary data from the Cana­dian Real Estate Asso­ci­a­tion showed sales and prices mod­er­at­ing as sup­ply began to creep back into the mar­ket, but March num­bers sug­gest Cana­di­ans are fever­ishly jump­ing into the mar­ket to side­step tougher mort­gage require­ments in effect Mon­day April 19 as well as to avoid new taxes being intro­duced in Ontario and British Colum­bia in June.

There were 97,663 homes put up for sale last month, a 20% jump from the pre­vi­ous high set in March 2008. A total of 233,402 list­ings have been booked since the begin­ning of the year, the most for any first quar­ter on record.

New list­ings are impor­tant because they can help mod­er­ate sharp price increases that occur in a sell­ers’ mar­ket as buy­ers are forced to com­pete for what lit­tle inven­tory is avail­able. That hasn’t hap­pened yet, how­ever, with sell­ers still in con­trol in most of the country.

The national aver­age price also spiked in March, hit­ting $340,920 – just $300 short of the all-time high reached last Octo­ber. Com­pared to a year ago, the aver­age price has gained 17.6%. CREA said 49,256 homes were sold, the sec­ond high­est for any March and 40.8% higher than March 2008.

“Nego­ti­a­tions still favour sell­ers dur­ing the home buy­ing process in a num­ber of major Cana­dian hous­ing mar­kets,” said Georges Pahud, the association’s pres­i­dent. “[How­ever,] the rise in new list­ings mean that buy­ers may shop around more before mak­ing an offer.”

In the first quar­ter, sea­son­ally adjusted sales hit 130,072 homes, the fourth high­est level on record. That’s a 3.4% decrease from the fourth quar­ter, when a siz­zling mar­ket spurred talk of a bub­ble among econ­o­mists and pushed the Fed­eral gov­ern­ment to enact tougher mort­gage rules to ensure con­sumers would be able to afford their mort­gages should inter­est rates rise.

Sales activ­ity in Ontario, Que­bec, and New­found­land & Labrador rose to new records in the first quar­ter, but the gains were mod­er­ated by a sharp drop in sales in British Colum­bia as con­sumers began to be priced out of the market.

“The ero­sion of hous­ing afford­abil­ity is crimp­ing activ­ity in some of Canada’s prici­est mar­kets in the lower main­land of British Colum­bia,” said CREA chief econ­o­mist Gre­gory Klump.

“Higher mort­gage inter­est rates and the rise in new list­ings may also soon reduce some of the urgency to pur­chase in Toronto. Sales activ­ity in British Colum­bia and Ontario is expected to ease over the sec­ond half of 2010 once the HST comes into effect, pulling national activ­ity lower. Ris­ing sup­ply and lower activ­ity will take the steam out of the pric­ing envi­ron­ment fol­low­ing upbeat home sales this spring.”

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