Home sales rise in October
Lori McLeod - Globe and Mail
After three straight months of declines sales of existing homes unexpectedly reversed course in October, gaining 1.3% over the previous month.
However the gain is most likely an aberration rather than a sustainable trend, and sales are expected to decline gradually for the rest of the year and in 2008, said Gregory Klump, chief economist at the Canadian Real Estate Association.
“The rebound was particularly surprising because it was spread right across the country in a number of major markets,” Mr. Klump said. “However we are still expecting that sales will gradually erode, primarily due to a decrease in affordability.”
Sales of resale homes rose to 28,966 units in October, a 7.6% gain over the same month last year, according to statistics from the Canadian Real Estate Association.
Activity rose in Toronto, Edmonton, Hamilton-Burlington, Montreal, Quebec City and Winnipeg. Stronger sales in these markets offset sales declines in Calgary, Vancouver, Saskatoon and Sudbury, cities which have experienced huge home price increases in the past year.
The average price of a resale home in Canada rose 10.6% in October compared with last year to $333,544, the sixth consecutive month in which the increase has exceed 10%. In Toronto, Regina, Saskatoon and Montreal average prices reached their highest levels on record.
Sales activity in most major centres has been very strong at the high end of the market, probably because there’s a dwindling supply of lower priced homes left in many cities, Mr. Klump said.
Residential listings on the Multiple Listing Service dropped slightly in October from September, but still reached their fifth highest monthly level on record.
“Negotiations still favour the seller in nearly all major markets,” Mr. Klump said.
Sales levels are expected to edge down as higher home prices and mortgage rates continue to squeeze buyers out of the market. The posted rate on a five-year mortgage at the big banks is currently sitting at 7.44%, 150 basis points higher than where it was in April.
While sales activity is expected to slow next year, it should still be a very strong year, Mr. Klump said.
“This will be a gradual slowdown but it doesn’t portend disaster. 2008 is still expected to be one of the best years on record, second only to 2007,” he said.
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