Real Estate Market Balancing
New Listings, Slower Sales Bring More Balance to Canadian Real Estate Market
By Sean Mckibbon
As existing home sales slipped in January, the Canadian Real Estate Association found itself touting a record of a different sort — that the month was the most balanced between buyers and sellers in seven years.
BMO Economist Doug Porter noted in a commentary that resale activity slipped in the month 0.4% and was down 8% against the year ago period.
“That’s a massive turnaround from last year’s 7.6% rise in overall sales,” he wrote. “The lousy weather may have played a role in restraining sales last month, although it’s not as if January is typically a treat on that front.”
Canadian Real Estate Association economist Gregory Klump adopted a more moderate take on the figures saying that his organization expected some softening in sales in 2008, but still expects overall sales for the year to come second only to 2007.
“We are forecasting an increase in new listings and sales to gradually ease back, that said we are forecasting the second best year on record ever, so sales will certainly remain strong,” said Klump.
The sales-to-new listings ratio in January fell to 55.9, the lowest level since January 2001 when the ratio was at 53.8. CMHC considers a ratio of 30-50 a “balanced market.” Klump said market tightness peaked in 2002 and has been decreasing steadily.
“We still anticipate negotiations will mildly favour a seller,” he said, but added that with more product to choose from buyers will take more time purchasing.
He said Newfoundland and Saskatchewan saw markets tighten, but that they were the exceptions.
While average price levels were up in the month over the previous January, Porter noted the 8.6% increases was “somewhat skewed by the mammoth 69% and 37% jumps in Regina and Saskatoon (respectively), although at least 12 cities reported a double digit gains…”
Porter and Klump both saidAlberta’s previously red-hot markets had cooled.
According to Porter, the Alberta markets are acting as a drag on the overall sales figures as Calgary sales fell 30.9% and Edmonton sales dropped 21.0%.
“With the further dip in January, Canadian home sales are now well-below year-ago levels, adding further evidence that the great boom is winding down. Sagging affordability appears to have finally dug into activity, most notably in Alberta. Still, prices across most of the country remain well above year-ago levels and most markets are well balanced, so we’re not looking at serious strains in the housing market. Modest interest rate relief will also provide a helping hand,” Porter wrote.