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Real estate market turns down
First back-to-back decline in 10 months may signal end of boom; rate fears blamed
Garry Marr
Financial Post
Canadian housing sales declined in March for a second consecutive month, prompting fears that the the red-hot real estate sector may have finally stalled after months of frenzied activity spurred on by low interest rates.
The Canadian Real Estate Association reported yesterday that unit sales in the country's top-25 markets dipped 9.5% on a seasonally adjusted basis in March, compared to February. Coming after a 6.5% decline the month before, the back-to-back drops are the first for the sector after 10 consecutive months of growth.
"[Housing] appears to have crested a bit," said Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. "There is clearly somewhat of a slowing going on."
He said a slowdown was to be expected, given how overheated the sector had become. The Toronto market, for instance, set a record for single-day sales on April 1 -- its second this year.
Market watchers said the buying spree may have eased in part because of worries over imminent interest-rate hikes.
Sellers continued to enter the market in March, however, with CREA numbers showing new listings were up 5.2% compared to February, on a seasonally adjusted basis.
"We have started to get more inventory," said Bob Linney, a CREA spokesman. "[The lack of inventory] was goosing the price," said Mr. Linney.
The average home sold for $197,289 in March this year, compared to $177,955 a year earlier
However, Mr. Linney cautioned against reading too much into the back to back unit sales declines.
"Two cars don't make a parade and two consecutive months don't make a trend. We are still up from a year ago," he said.
Compared to last year, unit sales are up 20% -- from 25,622 in March 2001 to 30,725 in March 2002. The dollar volume of sales is up 33% -- from $4.6-billion in March 2001 to $6-billion this past March.
Sherry Chris, vice-president of network services for Royal LePage, said the market may be cooling in some areas of the country but she said it is clear some cities are not showing any signs of a decline.
In terms of transactions, Vancouver remains one of the hottest markets in the country and recorded 47.8% more transactions this March compared to a year ago. Montreal was up 30.8% and Toronto almost 20%.
Prices also continue to rise, with Edmonton recording the single best year over year percentage increase, up 15.5% to an average price of $154,836.
"I think we've exhausted the market and it's become frustrating for buyers and realtors because of the low supply," Ms. Chris.
With the resale market as tight as it has been, purchasers have increasingly been turning to the new home market for product.
Canada Mortgage and Housing Corp. said last week housing starts were up 10.9% in March, their second-best monthly performance in almost 12 years.
Réal Gratton, a senior economist with CMHC, said with the housing market as strong as it has been it is no surprise to see a slight adjustment. But he thinks that's all this two-month drop is.
"It's not the beginning of a downward trend," said Mr. Gratton. "Housing is strong and it will probably continue for the rest of the year."
The Bank of Canada is expected to raise rates by 25 basis points today, but he doesn't expect that will weaken the market to any sizeable degree. "Rates are low and will be low even if there is an increase," said Mr. Gratton.
gmarr@nationalpost.com
First back-to-back decline in 10 months may signal end of boom; rate fears blamed
Garry Marr
Financial Post
Canadian housing sales declined in March for a second consecutive month, prompting fears that the the red-hot real estate sector may have finally stalled after months of frenzied activity spurred on by low interest rates.
The Canadian Real Estate Association reported yesterday that unit sales in the country's top-25 markets dipped 9.5% on a seasonally adjusted basis in March, compared to February. Coming after a 6.5% decline the month before, the back-to-back drops are the first for the sector after 10 consecutive months of growth.
"[Housing] appears to have crested a bit," said Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada. "There is clearly somewhat of a slowing going on."
He said a slowdown was to be expected, given how overheated the sector had become. The Toronto market, for instance, set a record for single-day sales on April 1 -- its second this year.
Market watchers said the buying spree may have eased in part because of worries over imminent interest-rate hikes.
Sellers continued to enter the market in March, however, with CREA numbers showing new listings were up 5.2% compared to February, on a seasonally adjusted basis.
"We have started to get more inventory," said Bob Linney, a CREA spokesman. "[The lack of inventory] was goosing the price," said Mr. Linney.
The average home sold for $197,289 in March this year, compared to $177,955 a year earlier
However, Mr. Linney cautioned against reading too much into the back to back unit sales declines.
"Two cars don't make a parade and two consecutive months don't make a trend. We are still up from a year ago," he said.
Compared to last year, unit sales are up 20% -- from 25,622 in March 2001 to 30,725 in March 2002. The dollar volume of sales is up 33% -- from $4.6-billion in March 2001 to $6-billion this past March.
Sherry Chris, vice-president of network services for Royal LePage, said the market may be cooling in some areas of the country but she said it is clear some cities are not showing any signs of a decline.
In terms of transactions, Vancouver remains one of the hottest markets in the country and recorded 47.8% more transactions this March compared to a year ago. Montreal was up 30.8% and Toronto almost 20%.
Prices also continue to rise, with Edmonton recording the single best year over year percentage increase, up 15.5% to an average price of $154,836.
"I think we've exhausted the market and it's become frustrating for buyers and realtors because of the low supply," Ms. Chris.
With the resale market as tight as it has been, purchasers have increasingly been turning to the new home market for product.
Canada Mortgage and Housing Corp. said last week housing starts were up 10.9% in March, their second-best monthly performance in almost 12 years.
Réal Gratton, a senior economist with CMHC, said with the housing market as strong as it has been it is no surprise to see a slight adjustment. But he thinks that's all this two-month drop is.
"It's not the beginning of a downward trend," said Mr. Gratton. "Housing is strong and it will probably continue for the rest of the year."
The Bank of Canada is expected to raise rates by 25 basis points today, but he doesn't expect that will weaken the market to any sizeable degree. "Rates are low and will be low even if there is an increase," said Mr. Gratton.
gmarr@nationalpost.com
