Home prices, sales still sizzling

Historically low mortgage rates pave way to record levels in April

Globe and Mail TAVIA GRANT May 17, 2007

Canadian home prices and sales both set records last month, a stark contrast to a wilting housing market south of the border.

The average price of a home jumped 9.5 per cent in April from a year ago to $323,936, the Canadian Real Estate Association said yesterday.

Canada’s real estate market remains hot amid historically low mortgage rates and a jobless rate approaching its best level in 30 years.

It’s a different picture in the U.S., where sales, home prices and builders’ profits are dwindling while mortgage defaults are on the rise.

“The Canadian housing market remains on a roll, in stark contrast to the ongoing woes in U.S. housing,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in a note. “This persistent divide is a key reason why we believe Canadian and U.S. monetary policies will diverge in the year ahead.”

Hot home prices will likely be reflected in today’s release on inflation numbers, with homeowner replacement costs creeping higher.

Home prices hit new records in Vancouver, Victoria, Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Toronto, London & St. Thomas, Ont., Ottawa, Montreal and Halifax-Dartmouth.

Prices haven’t risen everywhere - they’re lower in the Ontario communities of St. Catharines, Durham region, Windsor and Thunder Bay.

Home sales also hit a peak last month, the association said.

“Resale housing activity in the first quarter was far stronger than anybody had anticipated,” said Gregory Klump, the association’s chief economist. “Home buying sentiment remains strong in all regions, and new listings have been unable to keep pace with sales activity.”

Seasonally adjusted home sales in Canada’s major markets rose 1.9 per cent from March to 30,615 units, led by gains in Toronto and Montreal. Year-to-date transactions also set a new record in April.

New residential listings, meantime, rose 3.1 per cent in April, to their second-highest level on record.

Markets remain strong in the West. “There has been anecdotal evidence that resale activity in some Western markets is getting a boost from a shortage of lots and from buyers who don’t want to wait for their new home to be built,” Mr. Klump said.

His association predicts MLS sales will hit a record this year and edge down in 2008.

“The resale housing market will become more balanced as rising prices erode affordability and cause a gradual retreat in sales activity,” Mr. Klump said.