Friday, July 28, 2006

Home sales on pace to shatter records

onfident Canadian consumers are sending the country's housing markets to unforeseen highs, even as their American counterparts drive down the real estate market south of the border.

Home sales in Canada's major markets in the first half of 2006 blew past all previous records, and look as if they will set a new annual record this year, the Canadian Real Estate Association said Thursday.

A total of 186,177 homes changed hands between January and June — an increase of 3.6 per cent from the same period last year, when a record was also set.

The sales bonanza was obvious in major cities across the country. Calgary and Edmonton set new records yet again, but they were joined by Regina, Saskatoon, Winnipeg, Montreal, Quebec City, Sudbury, Ottawa and London, Ont.
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The Globe and Mail

Carmelo Rocca, owner of HomeLife Carmelo Realty Ltd., said the resale market for homes in Sudbury is the hottest he's seen it since 1971, when Inco Ltd. was hiring thousands of people to work in its mines.

“With the market right now, you put your house up for sale and within two or three days you have five or six offers,” Mr. Rocca said, adding that he thinks the market will be good for another three years. “Even the new homes are selling even before they're built.”

He said people are being drawn by an employment boom in the area, particularly at the mines, hospitals and at the universities.

The largest jump in sales volume for Canada was an 18.1-per-cent rise in Calgary for the first six months of the year, followed by a 17.4-per-cent leap in Edmonton.

Toronto, Canada's largest city, saw a 2.5-per-cent increase in sales volume for the first six months, although June sales this year were slightly lower than June sales a year ago, the association said.

And home sellers are jumping into the market like never before. New listings in the first half of the year topped 300,000, the highest six-month level on record and up 4.6 per cent from the same period in 2005.

Prices are rising too, although CREA warned that average prices are not a good indication of what a home seller can actually obtain for any given house. Average prices were up 11.8 per cent from December of last year, reaching $304,328 in June.

Record-breaking average prices were seen in Calgary, Edmonton, London, Montreal and Quebec City.

“With interest rates having peaked, strong employment and rising after-tax incomes will no doubt keep resale housing activity strong over the second half of the year,” said CREA's chief economist, Gregory Klump.

The increase in new listings should be encouraging to home buyers, added Bob Linney, CREA's communications director. That's because a higher number of houses on the market should temper the price rise and add some balance to the market, especially in Montreal and Toronto.

Ottawa is already experiencing that phenomenon.

“The market in Ottawa has stabilized this year,” said realtor Randy Oickle, who manages an Ottawa branch of Royal LePage Real Estate Services. “We've been in a seller's market for a number of years with record activity. This year is a very good year in real estate but the difference is there are more houses being listed. This gives buyers more choice and less pressure.”

The Canadian market is a stark contrast to the United States, where new home sales dropped 3 per cent in June. Analysts pointed to the drop in sales last month and the downward revision for May as fresh evidence that the market is slowing considerably from the impact of higher mortgage rates.

Sales of both new and existing homes in the United States set records for five consecutive years as the housing industry enjoyed a boom powered by the lowest mortgage rates in four decades.

But rates have risen this year as the U.S. Federal Reserve Board tightens credit conditions in hopes of slowing the economy and keeping inflation in check.

Consumer confidence is much higher in Canada than the United States, explained Mr. Linney, and interest rates are lower.

While rates have been rising in Canada, too, the prime rate in the United States is 8.25 per cent while in Canada it is just 6 per cent, said Philip Cross, chief of economic analysis at Statistics Canada.

“That's a lot of money on a variable rate,” he said.

Plus, in Canada, incomes are rising steadily, the labour market has been stronger and retail sales have been stronger — all pointing to a much healthier consumer in Canada than the United States, he added.

“Clearly they're slowing down, and we're just perking along quite nicely.”

The record-breaking streak can't continue forever in Canada though, he warned, pointing to the 40-per-cent price increases seen recently in Calgary and Edmonton.

“How long can a market support those kinds of rises? At some point you'd think that would slow down,” he said. “One would think of that as a healthy correction.”

But housing prices in Canada are not about to come crashing down like some are predicting in the United States, added Michael Gregory, a senior economist at BMO Nesbitt Burns Inc.

Much of the “froth” in the Canadian market stems from sales in Calgary and Edmonton, he said.

“If you strip out Alberta from the numbers, things are a little more subdued,” he added. “The Canadian market is not as vulnerable to a downturn as the U.S. market.”

With files from reporters Scott Deveau and Scott Roberts and AP

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