Monday, April 18, 2011

National home sales hold steady in March

OTTAWA – April 15th, 2011 – According to statistics released today by The Canadian Real Estate Association (CREA), national resale housing activity held steady in March 2011 compared to February.

Seasonally adjusted national home sales activity in March came in one tenth of a percentage point above levels for the previous month, with stable demand in most large urban centres.

With national sales in each of the first three months of 2011 running close to their five- or ten-year monthly averages, seasonally adjusted national sales activity in the first quarter of 2011 was up 4.5 per cent from levels recorded in the fourth quarter of last year, and reached the highest quarterly level in a year.

Most of the quarterly increase in seasonally adjusted national sales activity was due to demand in Vancouver and Toronto. Recent changes to mortgage regulations may have caused a number of sales in some of Canada’s more expensive housing markets to be brought forward into the first quarter that would have otherwise occurred later in the year.

Sellers looking to trade up before changes to mortgage regulations took effect made their move early, resulting in a significant rise in newly listed homes in January and February of this year. With changes to mortgage regulations looming in March, seasonally adjusted new residential listings for the month dropped five per cent month-to-month.

Steady sales activity combined with fewer new listings tightened the national resale housing market. The national sales-to-new listings ratio, a measure of the balance between supply and demand, stood at 56.5 per cent in March. This kept the national housing market firmly entrenched in balanced territory, with March marking the firmest reading for national market balance in more than a year.

Based on sales-to-new listings ratios, more than half of local markets in Canada could be considered balanced in March, with two-thirds of the remaining markets considered to be as sellers’ markets.

“The majority of local housing markets across Canada are well balanced, but not all of them are,” said Gary Morse, CREA’s President. “Within a province or local market, the balance between resale housing supply and demand can vary widely and evolve quickly, so buyers and sellers should speak with a local REALTOR® to understand housing market trends where they live.”

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 is another measure of the balance between housing supply and demand. The seasonally adjusted number of months of inventory stood at 5.6 months at the end of March on a national basis. This was unchanged from the previous month. Almost half of all local markets saw the number of months of inventory shrink compared to the previous month.

Throughout the first quarter of 2011, the national average price was skewed higher by strong activity in a few pricey areas of Greater Vancouver. March 2011 was no exception, with an increase of 8.9 per cent year-over year.

“A record number of multi-million dollar property sales in Richmond and Vancouver West are pushing up average prices for Greater Vancouver, British Columbia and nationally,” stated Gregory Klump, CREA’s Chief Economist. “If Vancouver is excluded from the equation, the national average price increase is cut by more than half to 4.3 per cent.”

“Looking ahead, evidence suggests that the potential rush of sales activity in March before recent changes to mortgage regulations took effect was a story that was largely focused in condo sales activity in Greater Vancouver. This confirms that the expected impact on sales activity of recent changes to mortgage regulations will likely be minor over the near term. Interest rates are now widely expected to remain on hold until at least mid-July, which is supportive for resale housing demand, market balance and prices,” Klump added.

Copyright CREA reprinted with permission

Bank of Canada holds key rate at 1%

Signals potential interest rate hikes ahead

The Bank of Canada held its trend setting Bank rate at 1.25 per cent on April 12, 2011. This marks the fifth consecutive policy rate announcement for which interest rates have been kept on hold.

The Bank acknowledged broadening global inflationary pressures and that Canadian economic growth has come in stronger than it predicted in its January Monetary Policy Report (MPR). It also said its April MPR updates the Bank’s inflation outlook, with inflation in Canada now expected to rise to its two per cent inflation by mid-2012. This is two quarters earlier than the Bank predicted in its previous MPR.

While interest rates are widely expected to rise this year to keep inflation under wraps, language used in the April policy rate announcement may be interpreted by financial market economists as a signal that the Bank will resume raising interest rates at its next policy interest rate announcement on May 31, 2011.

However, the Bank said “the persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.” These downside risks to inflation give the Bank some latitude as to when it will resume raising interest rates, since it will take time to gauge the impact that a strong Canadian dollar will have on near-term economic growth.

The Bank said it still expects consumer spending to slow to a rate more broadly in line with after-tax income, but thinks it could be stronger than it previously predicted due to wealth from continued home price increases, the rebound in the stock market, higher prices for commodity exports, and lower import prices due to a stronger Canadian dollar.

By keeping its trend-setting policy interest rates where they are, interest rates remain very positive for Canadian economic growth. Moreover, the Bank reiterated its statement that “any further reduction in monetary policy stimulus would need to be carefully considered.” This suggests the Bank’s continued intention not to make any sudden moves on interest rates.

As of April 12, 2011, the advertised five-year lending rate stood at 5.69 per cent. This is up a quarter of a percentage point from 5.44 per cent on March 1st, when the Bank made its previous policy interest rate announcement.

The Bank will make its next scheduled rate announcement on May 31st, 2011

(CREA 04/12/2011)

Two Speed Market Continues for BC Home Sales

Vancouver, BC – April 18, 2011. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province continued to climb higher in March. Compared to March of 2010, MLS® residential unit sales increased 11.5 per cent to 8,600 units. The average MLS® residential price rose 15 per cent to $594,157 in March compared to the same month last year.

"We continue to observe a two-speed market in BC, with surging consumer demand in Metro Vancouver overshadowing more moderate demand in other regions," said Cameron Muir, BCREA Chief Economist. "Vigorous consumer demand drove Greater Vancouver to its most active March since 2004, while the Fraser Valley had its strongest March in four years. Conversely, sales activity in other BC markets is expanding at a pace more inline with overall economic growth."

Year-to-date, BC residential sales dollar volume increased 21 per cent to $11.14 billion, compared to the same period last year. Residential unit sales increased 4.7 per cent to 19,147 units. The average MLS® residential price rose 15.4 per cent to $582,021 over the same period.

Copyright BCREA reprinted with permission