CREA News

Resale housing activity in Canada in February 2009 was up from seasonally adjusted levels the previous month, according to statistics released by The Canadian Real Estate Association (CREA).

A total of 28,669 homes traded hands via the Multiple Listing Service® (MLS®) nationally in February 2009 on a seasonally adjusted basis. This is 8.6 per cent above seasonally adjusted levels in January 2009, and the first monthly increase in activity since September 2008. Seasonally adjusted activity in February also surpassed levels reported in November and December of 2008.

Monthly seasonal increases in activity were largest in British Columbia (14.4 per cent), Nova Scotia (12.7 per cent), and Alberta (11.9 per cent). In Ontario and Quebec, the monthly rise was on par with the national increase.

“Typically the Spring market we’re moving into generates more activity, and this year there are the benefits from historically low mortgage rates and improved affordability in most markets,” says the President of The Canadian Real Estate Association, Calvin Lindberg. “REALTORS® are reporting increased interest especially from first time homebuyers.”

Actual (not seasonally adjusted) transactions numbered 25,373 units in February 2009. This was 31 per cent below MLS® residential sales levels a year earlier, but it is the smallest year-over-year decline since October 2008.

The supply of homes for sale remains high, but has been trending lower. National MLS® residential new listings numbered 65,060 units in February 2009, down 10.9 per cent from the same month one year ago. On a seasonally adjusted basis, MLS® residential new listings are down 11.4 per cent from their peak reached in May 2008.

“The housing supply is expected to continue easing, but it will take time before it realigns with lower demand,” said CREA Chief Economist Gregory Klump. “Economic uncertainty is keeping home buyers in a cautious mood, so homes are taking longer to sell than in recent years. Lower sales activity at the higher end of the price spectrum will keep the national MLS® residential average price under downward pressure.”

The national average price for home sales via the MLS® was $281,972 in February 2009, 9.2 per cent below February 2008. This is smaller than year-over-year declines observed in the past four months. It is also the first time that the year-over-year decline in the national average price has decelerated since first turning negative in July 2008.

The national MLS® residential average price continues to be pushed downward by lower activity in some of Canada’s more expensive housing markets and by fewer transactions in higher price ranges. The MLS® average home sale price remained up from year-ago levels in Saskatchewan, Manitoba, Quebec, New Brunswick, Prince Edward Island, and Newfoundland & Labrador in February 2009.

“Real estate is local, so it is important that buyers and sellers accurately determine pricing issues in their specific neighbourhood,” adds CREA President Calvin Lindberg, a West Vancouver REALTOR® .”Despite the doom and gloom, there are multiple offers on properties in some markets. That happens when the house is priced comparably to others in the area. Buyers are looking, but they are confused by the barrage of information they’re getting about the economy and the state of real estate. Consumer confidence remains a critical factor for the housing market.”

The downward pressure on the national MLS® residential average price is being skewed lower in large part by fewer sales in British Columbia, Alberta and Ontario, where homes are more expensive and demand has softened most. MLS® home sales in these three provinces accounted for 66 per cent of national activity in February 2009, down from 69 per cent in 2008.

The price trend is similar but less dramatic for the weighted national MLS® average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. The weighted national MLS® average sale price was down 5.3 per cent year-over-year in February, compared to a 6.1 per cent decline in January.

Seasonally adjusted residential dollar volume for MLS® sales totaled $8 billion in February 2009, an increase of 7.2 per cent from the previous month.

“Consumer confidence will continue to be depressed by a barrage of negative economic news in the months ahead,” said Klump. “Heightened job insecurity will keep many potential homebuyers on the sidelines. Those who are confident about their job situation will benefit from improving affordability in a number of housing markets.”

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 www.crea.ca.

A full PDF version of this news release is available here.
(CREA 16/03/09)

The Bank of Canada lowered its benchmark overnight lending rate by half of a percentage point to 0.5 per cent at its setting on March 3rd, 2009. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, declined to a record low of 0.75 per cent.

The Bank acknowledged the global economy has continued to deteriorate since it last lowered rates in January 2009. “The nature of the U.S. recession, with very weak auto and housing sectors, is particularly challenging for Canada,” said the Bank.

The Bank has repeatedly lowered its interest rate to support economic growth. Since December 2007, the Bank has cut its overnight lending rate by a total of four per cent.

“The Canadian economy is still widely expected to begin growing in the second half of 2009, as government spending and easier credit begins to lift economic growth,” said CREA Chief Economist Gregory Klump. “However, the Bank acknowledged that the decline in economic activity in the first half of 2009 could be sharper than forecast in January.”

The Bank reiterated its expectation that “the effects of the recent aggressive monetary and fiscal policy actions in Canada and other major economies will begin to be felt in the second half of this year and will build through 2010. Once the global financial system stabilizes and global growth recovers, the underlying strength of the Canadian economy and financial sector should ensure a more rapid recovery in Canada than in most other industrialized economies.”

The Bank also hinted for the first time that the recession could be longer than is currently forecast, however. Noting that there could be potential delays in stabilizing the global financial system, which it considers a precondition for the global and Canadian economic recoveries, the Bank said: “The timely implementation of ambitious plans in some major countries to address toxic assets and recapitalize financial institutions will be critical.”

As such, the forecast for economic growth in 2009 in the next Monetary Policy Report, which is slated for release in late April, will likely be revised further down. It remains to be seen whether the recovery expected by the Bank will be pushed out beyond the current forecast, in the second half of 2009.

“The Bank’s current forecast for economic growth and inflation, and likely further downward revisions, means it won’t raise interest rates anytime this year, but credit conditions have tightened, which will mute the benefit of the Bank of Canada’s recent interest rate cuts for consumers, business, and the economy,” said Klump.

When the Bank cut its overnight lending rate by 0.75 percentage points in December 2008, the prime rate fell by just 0.5 percentage points. This raised the spread to 1.75 per cent from 1.5 per cent, where it had stood for over a decade. This time, however, it appears that the Chartered Banks will cut their prime rates in step with the central bank.

Echoing previous messages about the potential for additional interest rate cuts when it next meets to set its interest rate policy, the Bank also said it “will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the two per cent inflation target over the medium term.”

The Bank also added: “Given the low level of the target for the overnight rate, the Bank is refining the approach it would take to provide additional monetary stimulus, if required, through credit and quantitative easing.” The framework for the possible use of such measures would be outlined in the April Monetary Policy Report. In general, quantitative easing is when the Bank uses newly created money to buy assets from Chartered Banks in order to raise the money supply and stimulate the economy.

When the Bank cut interest rates on March 3rd, the advertised five-year conventional mortgage rate stood at 5.79 per cent. This is down 1.5 per cent from one year earlier, and 0.96 per cent below where it stood when the Bank made its previous interest rate announcement on January 20th, 2009.

The ongoing credit crunch has led mortgage lenders to reduce discounts on advertised mortgage interest rates, and in some cases these have been completely eliminated.

“Sales activity and prices will decline this year, as many buyers hunker down and put off buying decisions during the economic recession,” said Klump. “Housing market prospects will improve in 2010 in tandem with a rebound in economic growth.” (CREA 03/03/2009)