Housing sales set record

Housing sales across the country set an all-time record last month, once again defying the experts that continue to predict the market is set to fall this year.

The Canadian Real Estate Association said yesterday 43,179 homes were sold in January on a seasonally adjusted basis. That was up 4.2% from December.

Prices also continued to defy the conventional wisdom that double-digit increases of the past few years would begin to subside. The average price of a home sold in January across the country reached $282,844 last month, a 10.1% increase from a year ago.

Greg Klump, chief economist with the Ottawa-based association, which represents real estate boards across the country, said his group isn't going to change its predictions for the market.

"We still expect sales to edge lower this year," he said. "Average prices increases will shrink after the spring season."

CREA has been calling for a 1.6% decline in sales activity this year after 2006 sales were the second best on record. The forecast is for a 6.9% increase in average price.

"With rising prices, we do expect resale activity will edge down slightly," said Mr. Klump.

The chief executive of Century 21 Canada Ltd. says the overall Canadian sales numbers got a boost from Toronto. "I was very surprised to see Toronto break a record [for sales]," said Don Lawby.

He thinks price increases will be about 3% nationally, not counting inflation. He expects sales to be about even with 2006.

One factor that has suddenly emerged as a potential benefit to the housing industry was Tuesday's stock-market decline, which had the TSX's benchmark index fall 2.7% in one day.

"There may be some people who moved to the stock market who will come back to real estate," said Mr. Lawby. "But the economy is good and so is consumer confidence and that's even more important to real estate. This will be a good year but not a record-breaker."

Of course, Mr. Lawby and others had forecast a decline in real estate sales in 2006 and by year-end they were almost even with the record-pace set in 2005. The drop was less than 0.1%.

Like most of 2006, Western Canada continued to drive prices across the country in January. Toronto prices were only up 6% in January from a year earlier, so they contributed little to the national number.

"The price trend was driven largely by Alberta and to some extent Vancouver," said Peter Norman, vice-president of Clayton Research. "We are in this conundrum where we feel like the housing market is peaking and there will be a pullback.

"But most areas of the country had great employment growth and that surprised everybody."

Mr. Norman said 2007 sales could match the 2006 figures, arguing early indications are the housing market is pretty stable.

January's record numbers need to be kept in perspective, analysts say. Even though numbers are seasonally adjusted they are impacted by unusual conditions.

"January is a low-volume sales month so seasonally adjusting the numbers blows them up," said Bob Dugan, chief economist Canada Mortgage and Housing Corp., explaining people don't buy homes in the winter. The actual number of sale in January was 32,063, which compares with the seasonally adjusted figure of 43,179.

But even factoring in the fact January is slow month, the market has started out ahead 7.8% versus last year, CREA said.

(prepared by Garry Marr/Financial Post)