2009 resale housing market ends on a high note

Existing home sales activity reached the highest level ever for the month of December, according to statistics released by The Canadian Real Estate Association. Strong demand in the second half of 2009, especially in the fourth quarter, pushed annual sales above 2008 levels.

Residential sales activity via the Multiple Listing Service® (MLS®) of Canadian real estate boards numbered 27,744 units in December 2009. This stands 72 per cent above activity in December 2008, when activity dropped to the lowest level in a decade. New records for the month of December were reported in Ontario, Quebec, Saskatchewan, New Brunswick, and Newfoundland & Labrador.

Seasonally adjusted national home sales totalled 46,805 units in December, capping the strongest fourth quarter period ever. A total of 137,957 homes traded hands on a seasonally adjusted basis in the fourth quarter of 2009. This is up 2.6 per cent from the previous record set in the first quarter of 2007. New quarterly records were set in British Columbia, Ontario, and Quebec.

National sales activity began 2009 on a weak footing. Despite year-over-year increases in the second and third quarters of the year, year-to-date activity was still trailing 2008 levels at the end of September 2009. A 59 per cent year-over-year gain in the fourth quarter of 2009 pushed sales activity above annual levels for 2008.

"Sales activity in 2009 came in like a lamb and went out like a lion," said CREA President Dale Ripplinger. "The continuation of unusually low interest rates may keep national sales activity near current levels over the coming months, as will a blip in housing demand in Ontario and British Columbia from homebuyers motivated to beat the introduction of the HST."

Annual activity in 2009 was down 10.7 per cent from the peak reached in 2007. A total of 465,251 homes traded hands through the MLS® systems of real estate boards in Canada in 2009. This is up 7.7 per cent from 2008 levels, and represents the fourth highest level on record for annual activity.

The national residential average price was $337,410 in December, up 19 per cent year-over-year. On an annual basis, average price climbed five per cent to a record $320,333. Average prices set new annual records in a majority of local markets in 2009, and in every province except Alberta.

The large year-over-year increase in the national average price in December reflects the high degree to which it was skewed downward in late 2008 by unusually low activity in Canada's priciest markets. The national average price was also skewed upward by rebounding activity in the spring and summer months of 2009. The national average price rose to unprecedented heights at that time, despite records having been set in only a small number of local markets.

2009 resale housing market ends on a high note The contribution of activity by higher priced markets toward the national average price has recently returned to more typical levels. Record level average prices in most regions are now driving the national average price to new heights.

The price trend is similar but less dramatic for the national weighted average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 3.6 per cent in 2009.

The residential average price in Canada's major markets was up 5.5 per cent year-over-year to $348,840 in 2009. As with the national counterpart, the price trend is similar but less dramatic for the major market weighted average price, which rose 2.3 per cent from 2008 levels.

Strong demand and headline average price gains are drawing more sellers to the market. New listings coming onto Boards' MLS® Systems across Canada rose to the highest level on record for the month of December, with a total of 33,090 residential properties coming on stream. This is up 4.8 per cent from December 2008, the first year-over-year gain in a year. On a seasonally adjusted basis, new listings rose by 4.7 per cent in December 2009 compared to the previous month.

The recent rising trend in new listings has not yet offset the steep decline in the number of new listings during the first half of 2009. As a result, new listings in 2009 were down 12.6 per cent from the annual peak in 2008.

Despite the recent rise in new listings, strong demand for resale housing continues to draw down inventories. There were 154,264 homes listed for sale on Boards' MLS® Systems in Canada at the end of December 2009, a decline of 22 per cent from levels reported one year ago.

Nationally, there were 4.1 months of inventory in December 2009 on a seasonally adjusted basis. This is the lowest level in more than two years.

The actual (not seasonally adjusted) number of months of inventory in December 2009 stood at 5.6 months, the lowest December figure since 2005, and well below the same month in 2008 (12.3 months). Although up slightly from November (five months), an increase is normal at this time of year since demand normally eases relative to supply over autumn and winter months. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

"CREA's latest statistics will no doubt spark further bubble talk amongst the usual suspects," said CREA Chief Economist Gregory Klump. "Cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer."

"The extraordinary decline in activity one year ago and subsequent rebound, particularly for higher-priced real estate, is stretching current year-over-year comparisons," he said. "By the second half of 2010, price gains are likely to shrink significantly, since a year will have elapsed since the decline and rebound." Klump added that, "Further expected increases in supply will also take some steam out of the market. A more balanced market will result in smaller price increases in the second half of the year, but a massive decline in demand similar to what we saw in late 2008 and early 2009 seems as unlikely as a massive spike in supply."

PLEASE NOTE: The information contained in this news release combines both major market and national MLS® sales information from the previous month. The Canadian Real Estate Association has previously released these separately.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighborhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

Source: Canadian Real Estate Association