Real estate market continues rebound from July lows
The Canadian Press
Canadian home sales volume rose in October for the third month in a row as the market continued to rebound from a trough hit in July following months of revved up activity in early 2010 and late 2011.
The Canadian Real Estate Association said Monday that seasonally adjusted home sales on its Multiple Listing Service climbed 4.6% in October, following similar increases in August and September.
CREA says October’s gains are a further sign the market is returning to normal and is balanced, which means favouring neither buyers nor sellers. Prices were up slightly from October 2009 and from September of this year.
Housing market activity now sits 13.3% above July levels, when it reached a low-point for the year.
Still, sales activity was 21.6% below levels reported last October, when activity set a new record for the month.
“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.”
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 ahead sales that may have otherwise taken place in the spring and summer.
“National sales activity rebounded last year without a single monthly decline and hit record levels in the second half of 2009,” CREA said in its release.
“As a result, large declines in activity compared to year-ago levels are masking recent monthly gains in national sales activity.”
The number of new listings on the MLS edged up 1.3% in October, still 14% below the recent peak reached in April 2010.
That the number of new listings is normalizing to levels consistent with the reduction in sales activity has kept the market balanced since the spring.
Price increases are also starting to level off as a cooler sales market becomes the new norm.
The national average price for homes sold this October was $343,747, up less than a percentage point compared to one year ago. It was the fourth month the average home price was flat when compared to a year ago.
However, the average home cost about $12,000 more in October than the $331,089 reported in September.
Prices reached a peaked of $346,881 in May.
The seasonally adjusted number of months of inventory stood at 6.2 months at the end of October, down from 6.5 months in September.
The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and measures the balance between housing supply and demand.
In October, three-quarters of local real estate boards posted monthly sales increases, led by the bustling Toronto and Vancouver markets.
However, record activity levels set in the last few months of 2009 indicate that it will be difficult to meet year-over-year comparisons for the rest of 2010.
Meanwhile, a second report released Monday from Canada Mortgage and Housing Corp. said the level of home construction will continue to trend downwards in the last quarter of this year and into 2011.
“High employment levels and low mortgage rates will continue to support demand for new homes in 2011. Nevertheless, housing starts will decrease next year to levels which are more in-line with long-term demographic fundamentals,” said Bob Dugan, CMHC’s chief economist.
Construction activity lags the resale home market by several months, but tends to fall along with a decrease in demand to avoid an oversupply of new homes on the market.
The federal Crown corporation said the reduced activity will be more in line with the rate of Canada’s population growth than in the past decade when low interest rates helped stimulate pentup demand for home sales.
It’s currently estimating about 186,200 housing starts this year.
CMHC estimates that construction will begin next year on between 148,000 and 202,300 homes, or about 174,800 units at the midpoint.
As for existing homes, the CMHC expects about 438,400 units will be sold next year through the Multiple Listing Service – about 2,000 fewer than this year.
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