Real estate activity in Canada expected to cool during the rest of 2010

Sales of existing properties in Canada improved in August with the latest figures showing that activity increased 4.1% in August, the first monthly rise since March.

The data from the Canadian Real Estate Association (CREA) shows that activity in the real estate market increases most in Ontario and British Columbia, with monthly gains in these two provinces accounting for most of the improvement in national sales activity in August.
Seasonally adjusted sales activity either increased or remained stable in over half of all local markets across Canada, the report also showed. And year to date transactions are up 2.2% compared to the first eight months of last year.
Activity rose sharply over the second half of 2009 and reached levels that are unlikely to be matched in the final four months of 2010, so year to date comparisons are forecast to turn down in the coming months. CREA is warning that the market is expected to cool in the rest of the year.
The number of new residential listings on Canadian MLS® Systems also edged up 1.9% on a seasonally adjusted basis in August compared to the previous month. Despite having edged slightly higher in all provinces except Alberta, new listings remain 16% below the peak reached last April on a national basis.
The average price of a home sold last month was $324,928, which is on par with the same month last year at $324,843. Average home prices eased slightly in Alberta and New Brunswick in August, but gains in every other province exceeded the national increase.
Average prices rose or were stable in nearly two thirds of all local markets on a year over year basis, but increases are shrinking in Canada’s most active and priciest markets.
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. It stood at 6.9 months at the end of August 2010 on a national basis, which is down slightly from the seven months of inventory at the end of July 2010.
The seasonally adjusted number of months of inventory also stood at 6.9 months at the end of August on a national basis. This is down from 7.3 months at the end of July, and marks the first month over month decline since last November.
‘Rising interest rates and a projected slowdown in job growth mean that the Canadian housing market is expected to continue to cool. This is overlooked in recent commentary that suggests further changes to mortgage regulations may be needed. A further tightening of regulations could negatively impact Canada’s softening housing market and consumer confidence,’ said Georges Pahud, president of CREA.
High sales activity late last year and earlier this year borrowed from sales this summer and will continue do so over the coming months, according to Gregory Klump, CREA’s chief economist.
‘This makes the return to more normal levels of sales activity look like a steep downward trend. The hangover from accelerated home purchases is likely to persist over the rest of the year. Although economic and job growth are expected to be tepid, they will continue to support housing markets,’ he added.