Buyers are popping up here and there

Seasonally adjusted homes sales were up 7% in March compared with the previous month. Numbers released this week by the Canadian Real Estate Association indicated that 31,135 homes traded hands nationally on the Multiple Listing Service. The month-on-month gain follows on the 10.3% increase in sales recorded in February from January.

"Despite the recent improvement, sales activity is still down 13.7% from a year ago ... Still, the improvement in recent months is an encouraging sign that the Canadian housing market has crossed the halfway point for this downturn," notes Robert Kavcic at BMO Capital Markets Economics. "Affordability is the highest in about four years, which should help fuel a rebound in sales once the job market stabilizes."

The most active markets were British Columbia (up 13.6%) and Ontario (10.5%), and while actual non-adjusted sales were 13.7% below last year's level, it was the smallest year-over-year decline in six months.

While centres such as Calgary, Edmonton and Vancouver suffered double-digit drops in prices, the average selling price of a home in the greater Toronto area stood at $362,050 in March, down 4.8% from the same month in 2008. According to CREA, in March this year, 6,171 units were sold in Toronto -- a 6.9% drop on the same month last year.

"A number of major housing markets are stabilizing, as buyers respond to improving affordability," said CREA chief economist Gregory Klump in a release. "Looking back to economic recessions in the early 1980s and 1990s, national resale housing activity bottomed out before the job market or economy did," said Mr. Klump. "It will take time for ample supplies of new and existing homes to be drawn down, but demand appears to be stabilizing."

While the rate of decline in home prices is slowing, it is still very much a buyers' market.

"Despite two months of improved sales activity, buyers are still in control of the Canadian real estate market. Further price declines and low mortgage rates will ultimately help trigger a recovery, but a reversal in the wave of job losses is one major prerequisite still outstanding," notes Mr. Kavcic.

Home builders south of the border appeared to show signs of optimism as the National Association of Home Builders index rose this month. Analysts suggest that recent slightly better housing data has influenced the mood in the construction industry.

"Clearly, the optimism that has tepidly emerged from the better housing data of late has reached out and touched the home builders. The National Association of Home Builders' housing market index jumped a larger-than-expected five points in April to a seven-month high of 14, the largest increase since May, 2003, and, while still low ... is that much farther from the record low reading of eight reached back in January," notes Jennifer Lee, economist, manager at BMO Capital Markets.

Builder sentiment indicated an expectation that there would be further improvement in the future.

"Home builders' expectations for present sales increased... suggesting a definite improvement in appetite from potential buyers," notes Ian Pollick, economics strategist at TD Securities. "While home builders are seeing healthy traffic currently, it is the future that is providing the most optimism. Likely, this is a result of falling prices, low mortgage rates and the sense that the economic landscape is slowly improving."

Analysts read some signs of stability.

"The sharp upturn in the home builder activity index in April provides further tentative evidence that the housing market is stabilizing, albeit at very low levels. The U. S. Federal Reserve Board's Beige Book also cited an increase in buyer traffic in some regions," notes Sal Guatieri, BMO Capital Markets economist.

Nevertheless, the hefty inventory of unsold homes in the U. S. combined with foreclosures means analysts temper expectations of a rapid recovery.

"Record high affordability, record low mortgage rates, and government's efforts to jump-start economic growth are giving potential buyers enough optimism to step in and take a look around," notes Ms. Lee. "But the supply of foreclosures that started to hit the marketplace over the last couple of weeks will be tough competition for these new homes."

(prepared by Helen Morris/Financial Post)