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
Greater Toronto Realtors reported 8,442 sales through the Multiple Listing Service® (MLS®) in June. This represented a 23 per cent decrease compared to the record 10,955 sales reported in June 2009. Sales for the second quarter of 2010 amounted to 28,810 – up one per cent annually. Year-to-date sales through June were up 23 per cent to 50,455 compared to the first six months of 2009.
"We experienced a record number of existing home sales during the first half of 2010, but these sales were weighted more towards the beginning of the year," said Toronto Real Estate Board President Bill Johnston. "The pace of home sales has moderated from record levels over the past two months with the prospect of higher mortgage rates."
The average price for June transactions was $435,034 – up eight per cent compared to the average of $403,972 recorded for June 2009.
"With more homes to choose from in the second quarter, many home buyers have been making less-aggressive offers. This has resulted in less upward pressure on the average selling price," said Jason Mercer, TREB's Senior Manager of Market Analysis. "The annual rate of average price growth in the second half of 2010 will be in the single digits."
In June, the median price was $367,750, from the $345,000 recorded during June of 2009.
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)
Reiterates commitment to hold until end of second quarter of 2010
As was widely expected, the Bank of Canada held its benchmark overnight lending rate steady at 0.25 per cent at its setting on January 19th, 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 economic recovery under way, the Bank acknowledged that the outlook for global growth was “somewhat stronger” than it had predicted in October, but stressed that this was still very much dependent on “exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.” The Bank did, however, remove its comment regarding “significant fragilities” in the global economy, which had featured prominently in the previous two announcements.
Economic growth in Canada turned positive in the third quarter, and is expected to have improved further in the fourth quarter, accompanied by an increase in total CPI inflation, and higher than expected core rate of inflation.
The Bank said it believes that the Canadian economy will have contracted 2.5 per cent 2009, though annual data is not yet finalized. The Bank had originally predicted a 2.4 per cent decline. The Bank also made some small changes to its forecast for this year and next. The Bank now sees economic growth of 2.9 per cent in 2010, down slightly from the 3.0 per cent projection in October.
For 2011, the forecast was upgraded to 3.5 per cent from 3.3 per cent last fall. The Bank said “the private sector should become the sole driver of domestic demand in 2011,” which is when government stimulus is set to expire.
The Bank named a number of factors supporting Canada’s economic recovery – policy support, increased confidence, improving financial conditions, global growth, and higher terms of trade. The Bank reiterated that the strong Canadian dollar and weak U.S. demand were the main drags on the Canadian economy. As a result, growth continues to be driven more by the domestic side and less by exports.
The Bank said that the profile for the recovery in Canada was still consistent with its October Monetary Policy Report, saying inflation would return to the 2 per cent target in the third quarter of 2011. Conditional on this outlook, the overnight rate can be expected to remain at its current level until the end of the second quarter of 2010.
The Bank noted that the risks to the inflation outlook remain unchanged from those outlined in the October Monetary Policy Report. Inflation could climb faster if global and domestic demand ends up being stronger than currently expected. By contrast, inflationary pressures would be held in check by a more protracted global recovery and persistent strength in the Canadian dollar.
While the Bank said it judged these risks to be roughly balanced, it noted that, since it cannot lower rates any further, the overall risk to the projection are tilted slightly to the downside.
“The Bank of Canada’s decision to leave rates on hold, until at least the second half of 2010, confirms the view that it’s still to early to even consider tapping the brakes on economic growth,” said CREA’s Chief Economist Gregory Klump. “While interest rates will eventually rise, the increases are likely to be small. The Bank recognizes that economic growth will rely on domestic demand once temporary government spending measures aimed at propping up economic growth expire. Raising interest rates too soon and by too much runs the risk of choking economic growth.”
As of January 19th, the advertised five-year conventional mortgage rate stood at 5.49 per cent. This is down 1.26 per cent from one year earlier, and stands 0.1 per cent below where it stood when the Bank made its previous interest rate announcement on December 8th.
Improving credit market conditions have enabled lenders to reintroduce discounts off posted mortgage interest rates. Discounts of up to a percentage point can be negotiated, depending on lender-client relationship.
http://creastats.crea.ca/natl/interest_rate_trends.htm
(CREA 01/19/2010)
