Resale housing forecast revised

Published July 30, 2010 Uncategorized Leave a Comment
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OTTAWA – July 30, 2010 – The Canadian Real Estate Association (CREA) revised its forecast downward for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations, and elevated its average price forecast.

Weaker than anticipated sales activity during the crucial spring home buying season in Canada’s four most active provincial markets prompted the revision. The decline is consistent with the exhaustion of pent-up demand from deferred purchases during the economic recession, and sales having been pulled forward into early 2010 due to changes in mortgage regulations.

National sales activity is forecast to reach 459,600 units in 2010, representing an annual decline of 1.2 per cent. Additional expected interest rate increases will keep homebuyers in a cautious mood, with sales activity expected to continue easing over the second half of the year as a result. In 2011, weaker economic growth and consumer spending will contribute to a decline in national sales activity of 7.3 per cent, with annual sales totaling 426,100 units.

“The Bank of Canada recognizes that inflation remains well contained and that economic growth will soften, so interest rates will rise slowly and at a measured pace, which will keep home financing within reach for many homebuyers,” said Georges Pahud, CREA President.  “While the jump in national sales activity earlier this year likely borrowed from the future, local markets trends are not necessarily in sync with national trends, so buyers and sellers would do well to consult with their local REALTOR® to best understand the outlook in their market.”

Average price trends have remained stable as new listings began to shrink in the last two months of the second quarter. Supply is expected to continue to adjust to lower demand, keeping the resale housing market balanced on a national basis and in most provinces.

The national average home price is forecast to rise 3.5 per cent in 2010 to $331,600, with increases in all provinces.

“Slowing first-time home buying activity means lower- and mid-priced homes are making a smaller contribution to the average price calculation, causing the average price to be skewed upward as a result,” said Gregory Klump, CREA Chief Economist. “It also means pricing momentum will lose steam due to rising competition among current homeowners looking to trade up.”

Although modest average price gains are forecast in 2011 in most provinces, the national average price is forecast to ease by 0.9 per cent to $328,600.

“The hangover from accelerated home purchases earlier this year is expected to persist over the rest of the year, but positive economic and job market trends bode well for home price stability,” said Klump. “Sales activity and new supply are both expected to continue to ease, so inventories are unlikely to pile up the way they did during the recession.

“Transitory factors that resulted in big swings in housing supply and demand may now be largely in the rearview mirror, so while resale housing activity is expected to ease, the pace of declines should begin to slow,” he added. “Homebuyers will no doubt welcome a more relaxed housing market in places where there was a shortage of supply earlier in the year.“

http://www.crea.ca/public/news_stats/pdfs/media_july30rpt_en.pdf

Bank of Canada raises interest rates further

Published July 20, 2010 Uncategorized Leave a Comment
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Notes slowing global economic growth

The Bank of Canada increased the target for its trend-setting overnight lending rate on July 20, 2010, raising it by a quarter of a percentage point to 0.75 per cent. The increase follows on the heels of an equal interest rate increase in June 2010, when it was raised for the first time since 2007. The Bank rate now stands at one per cent.

In its most recent interest rate announcement, the Bank marked down its outlook for economic growth globally, emphasizing the uneven economic recovery in the U.S., and weakening prospects for European economic growth.

In the Bank’s view, Canada’s domestic economy is evolving largely as expected in recent months, but trimmed its forecast for economic growth this year and next by 0.2 per cent to 3.5 per cent in 2010 and 2.9 per cent in 2011. While the Bank raised its forecast for Canadian economic to 2.2 per cent in 2012, it nonetheless left the easing trend for growth intact.

The Bank indicated, “[this] revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.
Where the domestic recovery had previously been led by housing and consumer spending it is now guided more by government stimulus.”

The Bank also reaffirmed its view that housing activity and household expenditures were pulled forward into the first half of 2010, which is expected to cause them to soften in the second half. It also recognized that business investment has been weaker than it previously expected, “held back by global uncertainties.” The Bank anticipates “that business investment and net exports will make a relatively larger contribution to growth” over its forecast horizon.

As of July 20th, the advertised five-year conventional mortgage rate of 5.79 per cent was down 0.06 per cent from one year earlier, and 0.2 per cent below where it stood when Bank made its previous interest rate announcement on June 1, 2010. However, it is 0.3 percentage points higher than it was at the beginning of the year.

The Bank has signaled to financial markets that it is leaving its options wide open as to whether it will raise interest rates further when it makes its next rate announcement on September 8th.

“As it did with its previous announcement in June, the Bank messaged financial markets that further interest rate increases are not pre-ordained,” said CREA Chief Economist Gregory Klump. “The strength of recent economic indicators have prompted the Bank to raise interest rates, but the Bank has signaled that it may keep rates on hold should the economic recovery begin to show signs of loosing steam.”

The Bank will make its next scheduled rate announcement on September 8th.

http://creastats.crea.ca/natl/interest_rate_trends.htm

(CREA 07/22/2010)

Home sales continue to cool in June

Published July 15, 2010 Uncategorized Leave a Comment

Statistics released by The Canadian Real Estate Association (CREA) show that the number of newly listed homes and sales activity declined in June 2010.

Seasonally adjusted national home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards receded 8.2 per cent in June from the previous month. Led by lower activity in Toronto and Calgary, sales declined in almost 70 per cent of local markets.

Tightened mortgage regulations and anticipated interest rate increases cooled sales activity throughout the second quarter, resulting in a decline of 13.3 per cent from near-record levels in the first quarter. As expected, these two national factors contributed to a widespread decline in activity, with transactions down in all but a dozen or so smaller markets.

Actual (not seasonally adjusted) national sales activity was 19.7 per cent lower in June 2010 compared to last year, when activity almost reached a new record for the month. Actual sales activity in the second quarter stood 2.8 per cent below levels reported in the second quarter of 2009. For the year-to-date, transactions are up 13.6 per cent compared to the first-six months of last year. This gap is expected to shrink as the year progresses, since activity trended upward over the second half of last year and is forecast to continue easing over the second half of 2010.

The number of newly listed homes on Canadian MLS® Systems in June 2010 declined by 6.8 per cent from the previous month, following a monthly decline of 4.8 per cent in May. A declining trend in new listings will help maintain the balance between supply and demand, and temper home price volatility.

The national average price of homes sold via Canadian MLS® Systems rose 4.9 per cent on a year-over-year basis in June to $342,662.

The national average price can be skewed by changes in provincial sales activity. The national weighted average price compensates for this by taking into account provincial proportions of privately owned housing stock. It climbed 6.3 per cent on a year-over-year basis in June 2010. Similarly, the residential average price in Canada’s major markets was up 5.7 per cent year-over-year in June, while the weighted major market average price rose 8.7 per cent.

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 5.7 months at the end of June 2010 on a national basis. This is up from 4.2 months one year ago, when it fell to its lowest level since the economic recovery began. The rise in the number of months of inventory was widespread, with increases from year-ago levels in all provinces, except Manitoba and Prince Edward Island.

The seasonally adjusted number of months of inventory stood at 6.9 months at the end of June on a national basis, the highest level since March 2009. It may rise further as sales activity trends lower over the second half of 2010, but an expected decline in the number of new listings should stabilize the balance between supply and demand.

“The housing market is becoming more challenging for sellers,” said CREA President Georges Pahud. “Buyers are in less of a hurry, so sellers should consult with their local REALTOR® on how to best price and present their home to attract purchase offers.”

“National home sales activity is easing due to fewer and more cautious first-time home buyers,” said Chief Economist Gregory Klump. “With interest rates on the rise, housing affordability and home sales activity are expected to continue to erode over the second half of 2010. While the pricing environment is becoming more challenging, a recovering economy and job market will provide support for housing activity and prices.”

PLEASE NOTE: The information contained in this news release combines both major market and national MLS® sales information from the previous month.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® is a co-operative marketing system used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 99,000 REALTORS® working through more than 100 real estate Boards and Associations.

Further information can be found at http://www.crea.ca/public/news_stats/pdfs/media_july15rpt_e.pdf

For more information, please contact:

Spencer Callaghan, Communications Officer
The Canadian Real Estate Association
P: 613-237-7111
E: scallaghan@crea.ca

May brings lower homes sales and fewer new listings

Published June 16, 2010 Uncategorized Leave a Comment
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OTTAWA – June 16th, 2010 – Statistics released by The Canadian Real Estate Association (CREA) show that home sales activity and new listings in Canada declined in May.

Seasonally adjusted home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards declined nationally by 9.5 per cent in May from near-record level activity the previous month. While activity declined in more than 70 per cent of local markets, the lower national figure resulted largely from fewer sales in Toronto, Vancouver and Ottawa.

Actual (not seasonally adjusted) national sales activity was down 4.3 per cent in May from the same month last year. In a departure from the normal seasonal pattern, national activity levels in May were also down from April levels. This suggests that the combination of changes to mortgage regulations and rising mortgage rates pulled forward a number of sales into April that would have otherwise taken place at a later date.

“May was the first full month in which sales activity was affected by these changes,” said CREA President Georges Pahud. “An accompanying decline in new listings and housing starts means these changes are also affecting the supply side, which will keep the market balanced and Canadian home prices stable.”

The seasonally adjusted number of homes that were new listings on Canadian MLS® Systems in May 2010 declined by four per cent from the previous month. This marks the first monthly decline in new listings in eight months. New listings had been climbing sharply, rising from a four-year low last September to the second highest level ever last month.

The number of homes listed for sale on Boards’ MLS® Systems at the end of May was up 5.4 per cent from levels at the same time last year, when the supply of homes for sale on the market had started declining.

The national average price of homes sold via Canadian MLS® Systems rose 8.5 per cent in May from a year ago. This is a smaller increase compared to those recorded over the past nine months.

“Supply and demand has become more balanced in a number of major markets,” said CREA Chief Economist Gregory Klump. “Homebuyers now have more choice and are likely be in less of a rush to purchase than they were recently, so the amount of time it takes to sell a home is expected to rise in the coming months.”

With last year’s string of downwardly skewed average price values having now mostly passed, year-over-year national average price comparisons are coming back into line with changes in the national weighted average price.

The weighted average price compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 8.4 per cent on a year-over-year basis in May 2010. Similarly, the residential average price in Canada’s major markets was up 9.8 per cent year-over-year in May, while the weighted major market average price rose 10.7 per cent.

The actual (not seasonally adjusted) number of months of inventory stood at 5.3 months in May 2010. This is up from 4.8 months at the same time last year. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

On a seasonally adjusted basis, months of inventory stood at 6.1 months in May, the highest level since last April.

“The number of months of inventory may rise further in response to easing sales activity and a further rise in the number of active listings,” said Klump. “However, the number of newly listed homes will ultimately retreat in response to a more competitive sales and pricing environment in a number of local markets. The outlooks for the Canadian economy, employment, and mortgage market trends remain upbeat, so supply and demand will remain balanced on a national basis. Canada will avoid a U.S.-style home price correction.”

PLEASE NOTE: The information contained in this news release combines both major market and national MLS® sales information from the previous month.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® is a co-operative marketing system used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 96,000 REALTORS® working through more than 100 real estate Boards and Associations.

Further information can be found at

http://www.crea.ca/public/news_stats/pdfs/Media_May10rpt_e.pdf

Resale housing forecast revised

Published June 2, 2010 Uncategorized Leave a Comment
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OTTAWA – June 2, 2010 – The Canadian Real Estate Association (CREA) has lowered its forecast for home sales via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations. The revision reflects a weaker than expected start to the year in British Columbia, and recent developments that pulled forward the timing as to when sales are expected to ease in other provinces.

CREA’s previous national forecast was heavily influenced by British Columbia and Ontario forecast trends, and this remains the case in the revised forecast. While sales activity is unfolding as expected in Ontario, the decline in affordability in British Columbia impacted sales in the province during the first quarter.

Additionally, changes to mortgage regulations announced in February are expected to marginally impact activity. The changes prompted some homebuyers to finance their home purchase before the new regulations took effect in April, which pulled forward a number of sales that would have otherwise taken place at a later date.

April also saw the Bank of Canada drop its conditional commitment to keep interest rates on hold until at least July, opening the door to an interest rate hike before then. Indeed, on June 1st, the Bank announced its decision to raise its trendsetting overnight lending rate by 25 basis points to a ½ a per cent, and indicated it expects the rate of growth to slow for consumer spending.

“Interest rates are expected to rise slowly and at a measured pace during a new era of government spending restraint, so home financing will remain within reach for many homebuyers,” said CREA President Georges Pahud.

CREA had previously forecasted sales would remain at elevated levels through the first half of 2010 before easing in the second half of the year and over 2011. While the forecasted trend for activity has not changed in CREA’s revised forecast, it has been pulled forward, with the fourth quarter of 2009 marking the peak of national activity. This has had the effect of lowering the forecast for national activity over the rest of the year and in 2011.

National activity is forecast to reach 490,600 units in 2010, up 5.5 per cent from 2009 and the second highest annual level on record. Lower expected activity in British Columbia accounts for more than half of the downward revision in national sales activity. Annual activity in Alberta was also revised downward due to weaker than expected activity in the first quarter. Ontario is still expected to see a record number of sales in 2010, but by a smaller margin than previously forecast.

Interest rate increases will contribute to weaker national sales activity in 2011. Transactions via the MLS® Systems of Canadian real estate Boards are forecast to decline 8.5 per cent to 448,700 units in 2011. Although this is a similar percentage decline compared to CREA’s previous forecast (-7.1 per cent), the downward revision in national activity levels for 2010 means that the forecast level for sales activity in 2011 has also been revised downward.

The national average home price is forecast to climb 1.6 per cent in 2010, reaching a record $325,400, with average price gains forecast in all provinces. The downward revision from the previously forecast 5.4 per cent gain reflects lower forecast sales activity in British Columbia, where most transactions are priced well above the national average.

All provinces are forecast to post modest average price gains in 2011, except British Columbia and Ontario. The forecast decline in activity is sharpest in these two provinces, with higher-priced transactions weakening most. Average prices are forecast to sag in these two provinces in the second half of 2010 before stabilizing next year. As the Ontario and British Columbia shares of national activity edge lower, there will be fewer higher priced properties in the calculation of the national average price. The national average price is forecast to decline by 2.2 per cent in 2011 as a result.

“With interest rates soon expected to rise, Canada is widely believed to be entering a typical demand-driven downturn due to recent prices increases and rising interest rates,” said Chief Economist Gregory Klump. “A downward trend in national sales activity combined with an increase in listings will result in a more balanced market.”

“In keeping with the return of a balanced housing market and typical demand-driven housing market cycle dynamics, prices will remain stable,” he said. “Canada’s solid mortgage market trends, conservative lending practices, and prudent borrowing by homebuyers means that Canada will avoid the massive realignment in housing supply and demand being experienced in the United States. Accordingly, Canada will avoid a U.S.-style housing price correction.”

http://www.crea.ca/public/news_stats/pdfs/forecast_news_release020610.pdf

(CREA 06/02/10)

Bank of Canada raises interest rates: Canada becomes first country in G7 to hike

Published June 2, 2010 Uncategorized Leave a Comment
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For the first time since 2007, the Bank of Canada raised its target for the overnight rate by one quarter of one percentage point to 0.5 per cent on June 1, 2010. The Bank rate was raised to 0.75 per cent and the deposit rate was unchanged at 0.25 per cent, thereby re-establishing the normal operating band of 50 basis points.

The Bank had been keeping its benchmark interest rate at the lowest possible level for more than a year to stimulate the fragile economic recovery.

The Bank noted that while that global economic recovery is well under way, it is unfolding unevenly on a global basis. It characterized the ongoing imbalances as “strong momentum in emerging market economies,” and “some consolidation of the recovery in… industrialized economies,” counterbalanced by the “possibility of renewed weakness in Europe.”

The Bank keyed in on current volatility in the European markets as the largest downside risk to global economic growth saying, “Recent tensions in Europe are likely to result in higher borrowing costs and more rapid tightening of fiscal policy in some countries.”
The Bank noted that spillover into Canada from events in Europe has resulted in a modest decline in commodity prices and some tightening in financial conditions.

The Bank downplayed slightly stronger than expected inflation and economic growth saying, “CPI inflation has been in line with the Bank’s April projections,” and “activity in Canada is unfolding largely as expected.” It also played up the idea that consumer spending would soon subside: “Going forward, household spending is expected to decelerate to a pace more consistent with income growth.”

As of June 1st, the advertised five-year conventional mortgage rate stood at 5.99 per cent. This is down 0.66 per cent from one year earlier, but stands 0.14 per cent above where it stood when the Bank made its previous interest rate announcement on April 20, 2010. It is also one half of a percentage point above where it stood at the beginning of the year.

“The Bank left its options open as to whether it will raise rates again when it makes its next interest rate announcement on July 20th,” said CREA Chief Economist Gregory Klump. “I expect it will raise rates by another quarter of a percentage point at that time, but will take a pause at some point later this year, especially since interest rates in the U.S. are likely on hold until next year.”

“Even though they are on the rise, mortgage rates will still be at low levels that are housing market friendly, with home financing remaining within reach for many homebuyers,” he added.

The Bank will make its next scheduled announcement on July 20th.

http://creastats.crea.ca/natl/interest_rate_trends.htm

(CREA 06/01/2010)

U.S.-Style Home Price Correction Unlikely in Canada

Published May 26, 2010 CREA Leave a Comment

The Canadian Real Estate Association (CREA) released a new report today indicating that home prices will stabilize, and will remain stable for some time. This means that Canadian homeowners are unlikely to experience a U.S.-style decline in the value of their homes.

“The relationship between average price and income has recently been cited as portending a U.S.-style correction in Canadian home prices,” said Gregory Klump, Chief Economist, CREA. “However, such warnings ignore the longer-term relationship between prices and income, and disregard typical Canadian housing market cycle dynamics.”

Home prices tend to rise in cycles, characterized by periods of sharp growth and periods of stability. By contrast, income generally follows an orderly upward trend over time. For home prices to keep pace with incomes, they must rise faster during housing booms to make up for periods of little or no price growth. Canadian home prices were stagnant throughout most of the 1990s, while incomes continued rising, making housing more affordable. Over the past decade, home prices have climbed sharply as mortgage interest rates declined.

Klump adds: “The Canadian housing market is now widely thought to be at, or very near, the top of a cycle, and the ratio of home prices to incomes is currently high. This ratio will revert to its long-term average as it always does as part of a normal housing market cycle. History suggests, however, that it will not do so by means of a significant correction in home prices. The more likely scenario is that home prices will stabilize, giving incomes a chance to catch up again.”

The correction in U.S. home prices has sparked fears that Canadian home prices may share a similar fate. However, according to Klump, “warnings to this effect ignore solid Canadian mortgage market trends.”

Conservative lending practices in the mortgage industry combined with prudent borrowing and accelerated payments among Canadian mortgage holders have been seen throughout the recent housing market cycle. Accelerated accumulation of home equity will provide options for the small proportion of homeowners who may face financial difficulty when their mortgage is renewed at a higher interest rate. These trends are expected to help Canada avoid a U.S.-style housing crisis.

The correction in U.S. home prices is set against a massive oversupply of homes due to distress sales, combined with a drop in housing demand due to unemployment. The unwinding of the housing boom in Canada will be more orderly, characterized by softening sales activity and stable prices.

To view the full report please visit: http://www.crea.ca/public/news_stats/pdfs/housing_report_2010.pdf

About The Canadian Real Estate Association

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 99,000 real estate Brokers/agents and salespeople working through more than 100 real estate Boards and Associations.

For more information, please contact:

Alyson Fair
613-237-7111 or 613-884-1460
Email: afair@crea.ca

Canada’s hot resale housing market starting to cool

Published May 17, 2010 Uncategorized 1 Comment

(OTTAWA – May 17, 2010) Home sales activity in Canada came up short of the record for the month of April and new listings continued to climb, according to statistics released by The Canadian Real Estate Association (CREA).

Residential sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards numbered 52,042 units in April 2010. This is less than one per cent short of the record for national sales activity during the month of April, which was set in 2007. Compared to April 2009, national activity was up 20 per cent.

Seasonally adjusted national home sales activity slipped 2.6 per cent from the previous month, and now stands 6.8 per cent below the peak reached in December 2009. More than half of the decline in activity over the first four months of 2010 resulted from fewer sales in British Columbia, while activity in Ontario and Quebec remains at or near record levels.

“The easing trend in national sales activity masks a rising trend in a number of major markets,” said CREA President Georges Pahud. “Real estate is local, so buyers and sellers should engage the services of a REALTOR® for knowledge about housing market trends in their market.”

Some 99,901 homes were newly listed for sale on Canadian MLS® Systems in April 2010, surpassing the previous record for the month of April set in 2008 by six-tenths of one per cent. A total of 236,397 residential properties were listed for sale on Boards’ MLS® Systems at the end of April 2010, down 1.9 per cent from levels one year earlier.

As for the national average price of homes sold via Canadian MLS® Systems, that figure rose 12.2 per cent over this time last year. This is a smaller increase compared to those recorded over the past eight months. Bucking the national trend, price gains continue to increase in a number of major markets in Alberta, Ontario and Quebec.

With last year’s string of downwardly skewed average price values having now mostly passed, and with activity in British Columbia’s lower mainland having settled down, year-over-year national average price comparisons are coming back into line with changes in the national weighted average price.

The weighted average price compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 11.3 per cent on a year-over-year basis in April 2010. Similarly, the residential average price in Canada’s major markets climbed 12.9 per cent year-over-year in April, while the weighted major market average price rose 12.1 per cent.

The actual (not seasonally adjusted) number of months of inventory stood at 4.5 months in April 2010. This is down from levels one year ago (5.6 months) and April 2008 (4.7 months), but up compared to April levels from 2004 through 2007. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

On a seasonally adjusted basis, months of inventory stood at 5.3 months in April, the highest level since last May.

“Next month will mark the passage of one year since the national average price rebounded from the recessionary trough to return to the pre-recession peak, so the rise in the national average price is expected to be more subdued next month, ” said CREA Chief Economist Gregory Klump. “The national average price could potentially be skewed higher over the next couple of months if buyers of higher priced homes in Ontario and British Columbia move their purchase decision forward to beat the introduction of the HST in July.”
PLEASE NOTE: The information contained in this news release combines both major market and national MLS® sales information from the previous month. The Canadian Real Estate Association has previously released these separately.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® is a co-operative marketing system used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 96,000 REALTORS® working through more than 100 real estate Boards and Associations.

Further information can be found at http://www.crea.ca/public/news_stats/pdfs/media_apr10rpt.pdf

Bank of Canada maintains interest rates

Published April 20, 2010 1 Leave a Comment
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Signals rate hike in June

As was widely expected, the Bank of Canada held its benchmark overnight lending rate steady at 0.25 per cent at its setting on April 20, 2010. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, remains at 0.5 per cent.

With the Bank having dropped its commitment to stay on hold until at least the second half of the year conditional on the outlook for inflation, financial markets now expect the Bank to raise rates at its next at its next fixed announcement date on June 1st.

The Bank raised its forecast for economic growth this year from 2.9 per cent in the January Monetary Policy Report to 3.7 per cent, attributing the more “front-loaded” profile for growth to “stronger near-term global growth” and “very strong housing activity”.

The Bank noted that the economy still faces headwinds from the strength of the Canadian dollar, weak U.S. demand, and “Canada’s relatively poor relative productivity performance”. The mention of productivity could be a signal that the Bank plans to downgrade the potential growth rate of the economy in its new Monetary Policy Report, due out on Thursday, meaning the economy would return to potential faster than previously forecast.

In fact, the Bank did move the goalposts forward as to when it expects the economy to return to full potential, now forecasting the second quarter of 2011. The Bank had previously forecast a return to potential by the third quarter of 2011. This is another signal that rates will have climb sooner in order to fight inflation.

The Bank said core inflation had been somewhat firmer than projected in January, but noted that this was due to temporary factors. The core rate is expected to ease slightly in the second quarter of 2010 and to remain near 2 per cent throughout the rest of the projection period. Total CPI inflation is expected to be slightly higher than 2 per cent over the coming year, before returning to the target in the second half of 2011.

In previous announcements, the Bank had noted that it believed the balance of risks to the outlook to be tilted to the downside. At its last announcement, the Bank judged those risks to be balanced. This announcement removed any mention of the balance of risks, leaving financial markets to draw their own conclusions.

“The April interest rate announcement all but guarantees the Bank will raise rates in June,” said CREA’s Chief Economist Gregory Klump.

As of April 19th, the advertised five-year conventional mortgage rate stood at 5.85 per cent. This is up 0.4 per cent from one year earlier, and stands 0.46 per cent above where it stood when the Bank made its previous interest rate announcement on March 2, 2010.

Improving credit market conditions have enabled lenders to reintroduce discounts off posted mortgage interest rates. Discounts of about one percentage point can be negotiated, depending on lender-client relationship.

http://creastats.crea.ca/natl/interest_rate_trends.htm

(CREA 03/02/2010)

Resale market sees nearly 100,000 homes listed for sale in March

Published April 15, 2010 1 1 Comment

Homebuyers have more choice heading into the busy spring buying season, with new supply in Canada’s resale housing market setting a record for the month of March. While resale housing demand remains strong, rising numbers of new listings are resulting in a more balanced national resale housing market.

According to statistics released by The Canadian Real Estate Association (CREA), some 97,663 residential properties were listed for sale on the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards in March 2010. This is an increase of 20 per cent from the previous March record set in 2008. A total of 233,402 new listings have come on stream since the beginning of the year, more than in any other first quarter period on record.

“Negotiations still favour sellers during the home buying process in a number of major Canadian housing markets,” said CREA President Georges Pahud. “The rise in new listings means that buyers may shop around more before making an offer.”

Demand remains very strong, but has edged lower compared to the record levels posted at the end of 2009. Seasonally adjusted national home sales totalled 130,072 units in the first three months of 2010. This represents the fourth highest quarterly level on record, down 3.4 per cent from the quarterly peak in the fourth quarter of last year. Sales activity in Ontario, Quebec, and Newfoundland & Labrador rose to new records in the first quarter. Higher activity in these provinces was offset by a decline in activity in British Columbia (-17.8 per cent) and Alberta (-9.7 per cent).

Actual (not seasonally adjusted) sales numbered 111,110 units in the first quarter of 2010. This is the third highest level ever for the first quarter period.

A total of 43,621 homes traded hands through Boards’ MLS® Systems on a seasonally adjusted basis in March 2010. This is an increase of 1.4 per cent from February, as further gains in Toronto more than offset a decline in activity in Vancouver. Seasonally adjusted sales scaled new heights in Toronto and Ottawa in March.

Unadjusted national sales activity numbered 49,256 units in March. This marks the second highest level on record for the month of March. On a year-over-year basis, sales were up 40.8 per cent, smaller than those of the previous five months. Since a year will soon have elapsed following the recessionary decline and subsequent rebound for the Canadian resale market, year-over-year comparisons are expected to continue shrinking in the months ahead.

The national average price of homes sold via Canadian MLS® Systems in March was $340,920. This is the second highest national average price on record, just $300 below the peak reached last October. Compared to March 2009, the national average home price was up 17.6 per cent. As with sales activity, the increase was smaller than those recorded over the past five months, and year-over-year gains are expected to become further subdued as the year progresses.

The price trend is similar but less dramatic for the national weighted average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 16 per cent on a year-over-year basis in March 2010.

The residential average price in Canada’s major markets climbed 19 per cent year-over-year to $373,835 in March. As with the national counterpart, the price trend is similar but less dramatic for the major market weighted average price, which rose 17 per cent from levels reported in March 2009.

There were 214,312 homes listed for sale on Boards’ MLS® Systems in Canada at the end of March 2010, a decline of nine per cent compared to the elevated levels of one year ago. This is the smallest year-over-year decline in active listings since June 2009.

The actual (not seasonally adjusted) number of months of inventory in March 2010 stood at 4.4 months. While well below where it stood one year ago (6.7 months), and down slightly from March 2008 (five months), months of inventory are higher compared to March from 2004 through 2007. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

On a seasonally adjusted basis, months of inventory stood at 4.6 months in March. This was little changed from February, but stands above levels reported in the previous four months.

“The erosion of housing affordability is crimping activity in some of Canada’s priciest markets in the lower mainland of British Columbia,” said CREA Chief Economist Gregory Klump. “Higher mortgage interest rates and the rise in new listings may also soon reduce some of the urgency to purchase in Toronto. Sales activity in British Columbia and Ontario is expected to ease over the second half of 2010 once the HST comes into effect, pulling national activity lower. Rising supply and lower activity will take the steam out of the pricing environment following upbeat home sales this spring.”

PLEASE NOTE: The information contained in this news release combines both major market and national MLS® sales information from the previous month. The Canadian Real Estate Association has previously released these separately.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® is a co-operative marketing system used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 98,000 REALTORS® working through more than 100 real estate Boards and Associations.

Further information can be found at http://www.crea.ca/public/news_stats/pdfs/media_mar10.pdf

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