Canada home resales hit record high in October
Home resales in October rise 45% to 45,818 so CREA ups sales forecasts for 2009 and 2010
Reuters
Sales of existing homes in Canada rose to a record monthly high in October due to record low interest rates and upbeat consumer confidence, prompting the Canadian Real Estate Association to boost its sales forecast for the year.
But analysts warned the sharp recovery in the sector may have got ahead of itself as the central bank could start raising rates if the housing market starts to look too hot.
The Canadian Real Estate Association said on Monday that 45,818 homes changed hands in October on a seasonally adjusted basis, up 45% from a year earlier, when news of the global financial crisis shook consumer confidence.
That is 2% above the previous record set in May 2007 and 74% above the January figure, when activity fell to the lowest level in a decade.
The average national price in October rose 20.7% from a year earlier to $341,079.
“The results are a bright spot in the Canadian economy,” Scotia Capital analysts Derek Holt and Karen Cordes wrote in a note. “But with prices up 20% over year ago levels and at all-time highs by virtually any measure, this is becoming an over-valued asset class in our opinion.”
Some analysts said the hot market could help persuade the Bank of Canada to break its conditional pledge to leave interest rates unchanged at 0.25% until mid-2010 to help stimulate the economy.
Still, CREA opted to increase its forecast for sales in 2009 to 460,200 units from its August forecast of 432,600, up more than 6%. For 2010, the industry group expects sales will rise 7% to 492,300 units.
“Pent-up demand built in late 2008 and early 2009 as many buyers moved to the sidelines pending an improved economic outlook,” said CREA President Dale Ripplinger.
“With the economic outlook having improved since then, the release of that pent-up demand will boost activity over the rest of the year and in 2010.”
If CREA’s forecasts are correct, 2010 will be the second highest year on record for Canadian home sales, after 2007.
“The rapid-fire rebound in Canadian housing is showing no sign of letting up,” said Douglas Porter, deputy chief economist at BMO Capital Markets.
“While that may be causing some sweaty palms among bubble-phobes, the quick turn is a vivid illustration that monetary policy still works in this country.”
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