John Woods
Canada's housing market is showing signs of stabilizing at what economists believe is a more sustainable pace.
Home sales in September rose 3 per cent from a month earlier, while prices slipped back to year-ago levels.
Sales were 19.8 per cent lower than last year's record-setting September, though they were the best sales numbers the Canadian Real Estate Association has posted since May. CREA said that sales were similar to September 2008, 2007 and 2006, adding that the decline appears worse than it actually was because of last year's record setting month.
"Record level sales activity late last year and earlier this year is expected to further stretch year-over-year comparisons in the months ahead," the national association said in a release.
The national average resale price "continued to stabilize" in September, it said, at $331,089. That was 1.8-per-cent higher than September, 2009. Last May, the price peaked at $346,881.
"At $331,089, the national average price remained on par with where it stood one year ago," CREA stated. "September marks the second consecutive month in which average price remained even with year-ago levels."
New listings remained near the levels of August, down 15 per cent from April's peak. The number of months of inventory in Canada, on a seasonally adjusted level, stood at 6.6 months at the end of September. That's how long it would take to sell all the listed houses at the current pace of sales.
"After a seasonally uncharacteristic spring and summer slump, Canadian home sales appear to be stabilizing at a new lower, but more sustainable level," said Bank of Nova Scotia economist Adrienne Warren.
"We expect interest rates will stay lower for longer, underpinning steady housing demand through the fall, contingent on at least a modest pace of job growth."
Mortgage rates are at all time lows, but CREA chief economist Gregory Klump said an uncertain economic picture will temper sales for the rest of the year.
"Since Canada's interest rate outlook is tied to a weakening outlook for economic and job growth, consumer sentiment will remain under pressure until economic prospects improve next year," he said.
"In the meantime, many Canadians will be focused on paying down their debts in anticipation of interest increases next year. That means the continuation of low and stable interest rates is unlikely to cause housing demand or prices to take off, especially since the hangover from accelerated home purchases earlier this year is expected to persist for some time."
Toronto-Dominion Bank economist Shahrzad Mobasher Fard noted that the pullback in five-year fixed mortgage rates, by 0.5 of a percentage point since July, is "expected to stimulate loan taking activity and hence, existing home sales activity, relative to the status quo.
"This, together with recent developments in existing home sales activity, signal the likelihood that we are closer to a balanced market position than previously envisaged," Ms. Mobasher Fard said in a research note. "Some firming up in existing home sales and prices may consequently be in sight. Going forward, downside pressures such as the decelerating pace of the economy, weak prospects for employment and income growth, and rising household indebtedness will limit Canadian existing home sales activity."