Image: Danilo Rizzuti / FreeDigitalPhotos.net
Canadian existing homes achieved record-breaking sales in December 2009, according to the Canadian Real Estate Association. Sales jumped 72 percent from December 2008, which was the weakest month for existing home sales in over a decade. The Multiple Listing Service of Canadian real estate boards reports that in December 2009 27,744 units were sold. Records were broken in several provinces, including Newfoundland and Labrador, New Brunswick, Saskatchewan, Quebec, Ontario and Saskatchewan.
With sales in December driving it, seasonally adjusted activity in the fourth quarter of 2009 also broke records. 137,957 homes were sold in the fourth quarter of 2009, the strongest period since the first quarter of 2007. Records were broken in the largest provinces of British Columbia, Ontario and Quebec.
Although sales activity was robust, the strong growth was partially due to very weak activity in late 2008 and early 2009. Until September 2009, sales were still below levels achieved in comparable periods in 2008. And overall, sales in 2009 failed to reach the levels achieved in 2007.
Along with unit sales, the average house sales price in December 2009 also reached new heights. Rising 19% on a year-on-year basis, the average home price hit $337,410. Alberta was the only province that didn’t break new pricing records.
Although some of this demand growth is being driven by a recovery from the very weak activity in 2008, it is also being driven by low interest rates. According to the Bank of Canada, the average five-year mortgage rate was 5.49 percent last week, and in May it was 5.25 percent.
“The continuation of unusually low interest rates may keep national sales activity near current levels over the coming months,” CREA President Dale Ripplinger has said.
Some economists like David Rosenberg of Gluskin Sheff & Associates Inc. are concerned that the price increases indicate that the market is getting ahead of itself.
However, the Bank of Canada Adviser David Wolf has said in a speech he gave last week that these are “premature” judgments. They are working with Finance Minister Jim Flaherty to find a way beyond adjusting interest rates to ensure that a housing bubble does not occur.
“There are some concerns now that I’ve spoken about and the governor of the Bank of Canada has also spoken about relating to insured mortgages and whether or not we are in danger of developing some sort of housing bubble, so we’re watching that carefully,” Jim Flaherty said.
Heleen Jacobsen
Broker of Record with InfoMarket Group GMAC Real Estate
www.infomarketgroup.com
