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High prices in Vancouver skewing property figures in Canada, CREA report shows

Sales activity held steady from April to May, but posted the first year on year gain in over a year due to falling demand in May 2010, the report shows. Year to date sales are in line with the 10 year average and the national housing market remains firmly entrenched in balanced territory, it says.

The national average price for homes sold in May 2011 was $376,817, up 8.6% from the same month last year. However, national average prices are still being skewed upward by historically high sales activity in certain Vancouver neighbourhoods and broadly based price gains in Toronto where supply remains tight relative to demand.
There were also gains in Edmonton but declines in Vancouver and Ottawa. If Vancouver sales are excluded from the calculation, the year on year change in the national average price amounts to 5.6%. Excluding Toronto and Vancouver shrinks the increase to 3.7%.

Actual, not seasonally adjusted, activity came in 2.7% above levels reported last May. Activity fell sharply last year between April and July, with May marking the mid point of that slide. Although activity has been more stable this year, last year’s sales volatility is expected to continue to affect year on year comparisons in the months ahead, the report points out.

‘The Canadian housing market has seen some big ups and downs in recent years, making national sales activity so far this year look like something of a Goldilocks story by comparison, not too hot, not too cold,’ said Gary Morse, CREA president.

Seasonally adjusted new residential listings were little changed from April to May, edging up one tenth of a percentage point. The number of newly listed homes fell in Vancouver, Fraser Valley and the Okanagan region in May, offsetting small gains in Toronto and Montreal.

With sales and new listings holding steady on a national basis in May, the resale housing market remained firmly planted in balanced territory. The national sales to new listings ratio, a measure of market balance, stood at 52.1% in May, little changed from 52.5% in April.

Based on a sales to new listings ratio of between 40 and 60%, housing markets were balanced in 62 of 101 real estate boards in Canada. Less than half of the rest can be characterized as sellers’ markets, based on a ratio above 60%.

‘For the most part, sellers’ markets became slightly more balanced than the previous month. Toronto stood out as an exception, with sales activity there growing faster than new supply,’ said Gregory Klump, CREA chief economist.

The seasonally adjusted number of months of inventory stood at 6.1 months at the end of May on a national basis. This is little changed compared to the six months of inventory at the end of April 2011. 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 is another measure of the balance between housing supply and demand.

‘Changes in the national average home price reflect variations in home sales activity across and within local markets. Failure to recognize changes in the mix of sales activity can lead to misinterpretation of average price fluctuations. It can also give rise to faulty predictions of broadly based home price deflation by way of price correction,’ added Klump.