Home sales soared in April for the third month in a row, but the real estate market has not yet made up for all the lost momentum of the past year, the Canadian Real Estate Association says.
Sales of homes in Canada, seasonally adjusted, jumped 11.2 per cent in April compared to March, the largest month-to-month increase in more than five years, CREA said. The gain compounds advances of 10.3 per cent in February and 7.7 per cent in March.
Home sales volumes were a full 32 per cent above January's levels – the lowest levels in a decade.
“Simply put, this was a very strong housing market report,” said Millan Mulraine, economics strategist at TD Securities. “It is suggesting that the worst of the correction in the Canadian housing market may be behind us, and that the housing sector may be on the mend.”
Compared to a year ago, however, home sales were down 11.8 per cent, CREA said. Still, this is a far milder decline than the record year-over-year drop of 42.2 per cent in November.
Prices are still lower now than a year ago, with the average sale price in April at $306,366 – about 3.2 per cent lower than April, 2008, when prices hit their pre-recession peak.
Indeed, economist Derek Holt at Scotia Capital Inc. doubts the month-over-month momentum can be sustained, mainly because the surge this spring is a result of unfulfilled demand from last winter and borrowed demand from the future.
Activity is strong now partly because no one was buying late last year when housing markets in Canada stagnated, he said.
Going forward, Canada is likely in for more deep job losses, which will hurt housing. And while extra-low mortgage rates and 35-year mortgages are spurring buying right now, those rates are poised to spike much higher in the coming years.
For now, though, the gains were widespread.
The volume of homes trading hands rose in 70 per cent of local markets in April, compared to March, CREA added. In particular, Toronto saw a 10 per cent increase, Vancouver's sales rose 30 per cent, Montreal was up 15 per cent and Calgary was up 31 per cent.
Still, compared to a year ago, home sales in Toronto were 10.5 per cent lower, Vancouver was off 17.4 per cent, Montreal was down 4.3 per cent and Calgary was 21 per cent lower.
The only cities showing a year-over-year increase in sales were Kitchener-Waterloo in southern Ontario, and Ottawa.
The key to the substantial increase in sales in the past few months is a growing realization by sellers that pricing has to be realistic, said Dale Ripplinger, a real estate broker based in Regina and also the president of CREA.
“Price adjustments in some markets have helped affordability. Second, lenders do have money for people and properties that qualify, although some are being more stringent.”
A recovery of consumer confidence has also helped boost sales in the housing market, he said.
Lower mortgage rates are also a big factor, added Mr. Mulraine.
“It appears that home-buyers are taking full advantage, despite the bad economy. And this is certainly encouraging,” he said in a note to clients.
Also encouraging a more stable housing market is a continuing decline in the supply of homes coming on to the market, CREA noted. New listings in April (seasonally adjusted) were 1.8 per cent lower than in March, and 16.4 per cent lower than the peak of May, 2008.
The spring housing market has been more active than CREA had anticipated, prompting a small upward revision to its forecast for sales for the rest of 2009.
For 2009, CREA now expects sales to fall 14.7 per cent to 307,500 homes – slightly less than in its last forecast issued in February. Stronger-than-expected rebounds in British Columbia and Ontario were the drivers behind the revision, CREA said.
2010 should bring a 7.2 per cent increase in sales – a slightly weaker rebound than in previous forecasts because of downgraded expectations for economic growth next year. The rebound is expected to be strongest in British Columbia and Alberta.
CREA economist Gregory Klump said he expects national average prices will rebound slowly from the low reached in January, and begin to post modest year-over-year increases during the fourth quarter of 2009.
