Sales expected to slow in new year

By Sunny Freeman The Canadian Press

Housing market activity has rebounded from a trough hit in July, but sales are expected to enter the new year at a more subdued pace that is closer to normal than the revved up levels reported earlier this year.

The Canadian Real Estate Association said Monday that seasonally adjusted home sales on its Multiple Listing Service climbed 4.6% to 35,714 units in October, following similar increases in August and September.

“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.”

Housing market activity now sits 13.3% above July levels — a low-point for the year when sales declined 30% from a peak in the final quarter of last year.

Still, sales activity was 21.6% below the record levels reported last October.

Pascal Gauthier, senior economist at TD Economics said October’s figures were indicative of a “soft landing” in the housing market.

“The last three months of data suggest that a trough in resale housing activity may have formed earlier than we expected.”

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 sales ahead into the end of 2009 and the beginning of 2010 that may have otherwise taken place in the spring and summer. It may also have lured buyers into paying more for homes than they would have without the sense of urgency.

Year-over-year prices rose incrementally in October, following a brief dip in September. However, they were up about three% from the month before.

Douglas Porter, deputy chief economist at the Bank of Montreal, said the market is finally approaching something closer to “normalcy” after wild swings in prices and activity over the past three years.

“Sales are still down heavily from the piping hot pace of a year ago, but they are close to average levels since 2000,” he said.

“And, prices are up just slightly from a year ago, while the inventory of unsold homes is close to typical. In other words, there’s not much here for either the wild-eyed optimists or the ranting pessimists, which is probably a good thing.”

Sales volumes for the first 10 months of the year are now down 2.6% from 2009’s pace, with B.C. experiencing the biggest sales drop, followed by Alberta and Ontario.

The number of new listings on the MLS edged up 1.3% in October, still 14% below the recent peak reached in April 2010.

The number of new listings is normalizing to levels consistent with the reduction in sales activity, which has kept the market balanced since the spring.

Price increases are starting to level off as a cooler sales market becomes the new norm.

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