A real estate sign is seen in front of a Montreal home on January 17, 2011. THE CANADIAN PRESS/Paul Chiasson
TORONTO – An early bout of spring weather helped Canadian home sales pick up in February following two months of declines, defying predictions the market is starting to cool.
Unseasonably warm winter weather in many parts of the country helped sales by keeping Canadians shopping during what are usually the slower months, noted BMO economist Douglas Porter.
“The Canadian housing market remains buoyant, with an unseasonably mild winter likely adding some further juice to the mix,” Porter said.
The Canadian Real Estate Association said Thursday home sales rose 1.4 per cent from the prior month in February, gaining back one-third of the monthly decline in activity between December and January.
Compared with a year ago, actual home sales rose 8.6 per cent to 36,937 homes from 34,021 sold over CREA’s Multiple Listing Service last February.
CREA noted the market remained balanced as both home sales and the number of newly listed homes increased 1.9 per cent, reaching their highest level since May 2010.
“A rebound in new listings in Toronto and Montreal, Canada’s two most active markets, offset a retreat in new listings in Vancouver, Canada’s third largest market,” CREA said in a release.
About 60 per cent of all regional markets were in balanced territory last month, but there was an increase in the number of buyers markets compared to sellers markets, a phenomenon that has not happened in some time because there had been such demand for houses.
That increase in supply should help to keep the market balanced going forward and home price growth in check.
The national average price for homes sold in February was $372,763, up two per cent from its reading for the same month last year.
Last year at this time, a flurry of activity in Vancouver’s high-end real estate market sent average home prices there skyrocketing. That also served to skew the national average home price higher.
“In February 2011, the national average price was stretched upward by a spike in high-end home sales in some of Vancouver’s priciest neighbourhoods, and a replay of that was not expected this year,” said Gregory Klump, CREA’s Chief Economist.
“February’s data bear this out, but other factors are now keeping the national average price aloft. The main one is the housing market in Toronto, where a tight balance between supply and demand continues to drive some of the strongest home price gains in the country, particularly for single detached properties.”
A preference in recent months for single family homes, which are typically more expensive than condos, has helped to buoy the national average home price.
Industry watchers, who are closely monitoring home prices, have suggested Canada’s real estate market, which has been fuelled by low mortgage rates since the recession, will soon cool off — but many predict a so-called “soft landing.”
Others have called for a more drastic decline in sales and home prices, saying that the market is overheated, creating a housing bubble that could soon burst.
Earlier this month, Macleans had a cover story entitled “Real estate crisis: You’re about to get burned.”
“Why it’s officially time to panic,” the magazine warned.
But BMO’s Porter said that the modest two per cent increase in home prices hardly justifies predictions of a devastating housing crash.
“21 of the 26 largest markets reported a single-digit price increase from year-ago levels, hardly consistent with an out-of-control market,” Porter said.
“Could it just be possible that with a high percentage of Canadian analysts and media outlets located in Toronto, that the perception of Canada’s housing market is being deeply influenced by the strength in the local market?” Porter wondered.
Only three cities, Toronto, Sudbury and Windsor, Ont., have seen double-digit price increases in the past year, while two others have seen drops, he said.
However, the average two per cent rise in home prices last month was skewed lower because of decelerating activity in Vancouver from a year ago.
On a weighted basis, which gives each region, regardless of size, an equal weighting, prices were up 4.6 per cent year-over-year, a jump that will “raise eyebrows in Ottawa,” said CIBC economist Avery Shenfeld.
“Policy-makers are growing more concerned about the risks of an overshoot in home prices (and related mortgage debt) that would set Canada up for a harder landing down the road,” he said.
“That increases the odds of a policy response at some point this year if home price momentum continues, with measures aimed directly at housing and mortgages rather than rate hikes being the likely weapon under consideration.”
Ottawa has stepped in with tighter lending standards three times in the past three years in order to reduce the risk of overborrowing from those most vulnerable any rise in interest rates.
Calgary, Toronto, Barrie, Montreal, Quebec City, Saint John, and Halifax-Dartmouth were some of the hottest markets.
A total of 61,772 homes changed hands in the opening months of 2012, up 6.7 per cent from the same period in 2011.