Posts tagged economy

Average price rises 19% in November, compared with a year ago.

Steve Ladurantaye – Globe and Mail

National home sales increased by 73% in November from the trough seen a year ago, with Ontario and Quebec hitting new monthly records as buyers took advantage of record low interest rates to secure mortgages. The national average price gained 19% compared to November 2008, at $337,231, the Canadian Real Estate Association said. Since the beginning of the year, prices have gained 4.4% compared to the same time last year.

“The year-over-year increase in November continues to reflect the high degree to which the average was skewed downward last year by plummeting activity in Canada’s priciest markets, and then upward by rebounding activity,” the association said in a statement. CREA tracked 36,383 deals on its Multiple Listing Service in November. Crediting the housing market for leading “the overall Canadian economy out of the recession,” association president Dale Ripplinger said the numbers were a sign of an entrenched recovery. “National home sales activity last month shows how strongly the housing market has rebounded since the beginning of the year,” he said.

About 437,507 homes have been sold through the CREA-owned MLS system so far this year, up 5% from last year at the same time, but lower than the previous three years. One of the main drivers of price increases has been a lack of supply, but higher prices are beginning to draw more sellers into the market. Seasonally adjusted new listings rose 5% from October, to 69,110, in the largest gain since January 2008. There is still a dearth of supply however, with the number of homes for sale 23% lower than they were a year ago.

Comment: I wish we had 5% more listings here in Toronto! We are still down close to 50% from this time last year, making things very difficult for buyers.

The association’s economist, Gregory Klump, said as prices climb higher, would-be buyers may put off purchases, cooling off a hot market. Higher interest rates, expected in 2010, will also dampen their enthusiasm. “Deteriorating housing affordability will rein in sales activity as the overall economy further improves and the pool of buyers who qualify for financing shrinks,” he said.

While sellers have no doubt been delighted by the premiums their homes have been fetching, a growing chorus of economists are expressing concern that the recovery isn’t sustainable.

“We’ve got a long way to go before we could put a bubble label on this market,” Merrill Lynch Bank of American economist Sheryl King said Monday. “However, with mortgage rates at decades low – and even more attractive if home buyers choose the variable mortgage option which carries rates as low as 2.15% – the seeds of a bubble are definitely in place.”