MLS residential home sales decline in October

Published November 14, 2008 CREA 0 Comments

The number of properties sold via the MLS® systems of all real estate boards across Canada declined in October 2008, according to statistics released by The Canadian Real Estate Association (CREA). Much of the decline in national sales activity resulted from fewer sales in several major markets, including Toronto.

Seasonally adjusted residential MLS® sales activity in all markets numbered 32,048 units in October 2008, the lowest level for monthly activity since July 2002. This is down 14 per cent from sales levels recorded in September, and the largest month-over-month decline in seasonally adjusted sales activity since June 1994.

In Canada’s major markets, seasonally adjusted residential MLS® sales activity in October totaled 21,091 units, down 15.1 per cent from sales activity in September.

“Many homebuyers across Canada battened down the hatches in October as they were concerned with dire headlines about stock market volatility and a global economic downturn,” said CREA’s Chief Economist Gregory Klump. “Elimination of mortgage default insurance availability for purchases with less than a five per cent down payment and for amortizations beyond thirty-five years also likely played a lesser role in the decline in sales activity.”

Activity was down from levels recorded in September in more than three quarters of Canadian housing markets, including the five most active major markets: Toronto, Montreal, Vancouver, Calgary, and Edmonton. Fewer sales in Toronto accounted for nearly one third of the decline in national MLS® sales activity.

“The breadth and depth of the drop in MLS® activity suggests a major downshift in consumer psychology” adds Klump. “And that has moved many homebuyers to the sidelines until economic news begins to improve.”

The drop in sales activity resulted in a more balanced national resale housing market than at any other time in over a decade. Markets became more balanced in every province except Newfoundland & Labrador, where sales activity remains near peak levels.

Seasonally adjusted dollar volume for MLS® sales totaled $9.1 billion in October 2008, down 17.7 per cent from the previous month. Fewer transactions in Ontario, British Columbia, and Alberta accounted for more than 90 per cent of the monthly decline in national MLS® dollar value.

“The gap between national sales activity and the number of new listings is at its widest since 1990,” Klump added. “This situation is unlikely to persist for long. New listings will decline, which will stabilize the market.”

Consumer confidence in October of 2008 declined to levels not seen since the mid-‘90s, and that is reflected in the housing market trends, the President of The Canadian Real Estate Association, Calvin Lindberg, points out. “The major drop in consumer confidence and a steady stream of economic bad news from the financial markets is taking its toll on the national housing market.”

“When consumers are not confident about their financial situation, they’re not active in the housing market, and that in turn impacts the economy more,” the CREA President added. According to a study prepared for The Canadian Real Estate Association, the overall economic consumer spending spin-offs from MLS® transactions are $15.3 billion per year, including moving and renovation costs, and purchase of new furniture and appliances.

Canada’s more expensive housing markets continues to weigh on the national MLS® residential average price.

The average sale price of residential properties sold via the MLS® in October 2008 was $281,133, 9.9 per cent below where it stood in the same month last year. The price trend is similar but less dramatic for the weighted national MLS® average price, in which the proportion of privately owned housing stock in each province is taken into account. The weighted national MLS® average price eased by five per cent on a year-over-year basis in October.
MLS® home sales activity will continue cooling trend
Published November 10, 2008 CREA 0 Comments

In line with the recent downward revisions of Canadian economic and job growth forecasts, The Canadian Real Estate Association is updating its MLS® housing market forecast for the balance of 2008, and 2009. National home sales activity is now forecast to decrease by 12 per cent to 461,200 units in 2008, and decrease by three per cent in 2009. The number of new listings is forecast to decline further from the peak reached in the second quarter of 2008, with levels in 2009 on par with levels in 2007.

Fewer new listings will stabilize the resale housing market in 2009. Average home prices will reach new heights in nearly all provinces in 2008, but declining activity in higher priced markets will hold the national average price stable this year compared to 2007.

Average price is forecast to reach new heights in six of ten provinces in 2009, but lower sales activity in British Columbia will continue weighing on the national average price. The national average price is forecast to ease by 2.1 per cent in 2009.

Canadian economic growth is forecast to start improving in the second half of 2009 before accelerating in 2010. Re-aligning housing market balance and improving home affordability will set the stage for an improving housing market in 2010.

“Canadian economic growth is being sideswiped by financial market turmoil, slowing world economic growth, and weaker commodity prices,” said CREA Chief Economist Gregory Klump. “The question of whether Canada will avoid a technical recession is moot, growth will be slow enough that it will feel like a recession.”

“Consumer confi dence is being battered by downbeat headline news. Homebuyer sentiment has become very cautious, by contrast to the urgency to purchase in 2007. There are fewer buyers and they are taking longer to shop, so the pricing environment is very competitive. Unrealistically priced homes will sit on the market. Sellers are by and large under no distress to sell. Those who put their home on the market at an unrealistic price and are unwilling to cut it will likely take it off the market when the listing expires with a view to selling another day.”

“The projected decline in new MLS® listings will prevent an oversupply of homes available for sale on the Canadian housing market”, says CREA President Calvin Lindberg. “This stands in stark contrast to the U.S. housing market, which is significantly oversupplied.”

“Canadians are definitely concerned by the economic news out of the U.S., and much of that news stems from distress in the U.S. housing market. Canadians should realize that Canada’s economy and housing market are both in better shape. This means the downturn in Canadian consumer confi dence will pass and when it does, housing demand will rebound, especially when they realize the window of opportunity to buy at reduced prices and at low interest rates will begin to narrow once economic growth shows signs of rebounding next year.”

A brief video broadcast about this housing market information featuring CREA President Calvin Lindberg and CREA Chief Economist Gregory Klump are available on www.crea.ca. You can also subscribe to CREA’s RSS feed for the latest news and information about the existing housing market in Canada, published by CREA.

To view the full PDF version of this news release, click here.
Bank of Canada cuts interest rates again
Published October 21, 2008 CREA 0 Comments

The Bank of Canada lowered its benchmark overnight lending rate by one quarter of a percentage point to 2.25 per cent at its setting on October 21st. The trend-setting Bank rate, which is set 0.25 percentage points above the overnight lending rate, declined to 2.5 per cent.

The Bank also lowered its policy interest rate by half a percentage point on October 8th, as part of a coordinated cut in interest rates with other central banks. Combined with the interest rate cut on October 21st, the Bank has cut its overnight lending rate by three quarters of a percentage point since it last met to set its policy interest rate on September 3rd.

The Bank’s decision to cut interest rates aims to support Canadian economic growth. The Bank recognized the impact that the global credit crunch is having on global economic growth, indicating “the global economy appears to be heading into a mild recession, led by a U.S. economy already in recession.”

“Slowing global economic growth continues to reduce demand and prices for energy and other commodities,“ said CREA Chief Economist Gregory Klump. “The Bank now expects core inflation to remain below its target of two per cent until the end of 2010, so it can further cut interest rates without worrying about causing inflation to spiral upward.”

To stabilize credit markets in the aftermath of the U.S. sub-prime mortgage market meltdown, the Bank has cut the overnight lending rate by 2.25 percentage points from December 2007 to October 2008.

The Bank reduced its forecast for Canadian economic growth. When announcing further interest rate cuts, it said, “The Bank expects growth to be sluggish through the first quarter of next year, then to pick up over the rest of 2009 and to accelerate to above-potential growth in 2010 supported by improving credit conditions, the lagged effects of monetary policy actions and stronger global growth. The recent sizeable depreciation of the Canadian dollar will also provide an important offset to the effects of weaker global demand and lower commodity prices. Overall, the Bank projects average annual growth in real GDP of 0.6 per cent in both 2008 and 2009, and 3.4 per cent in 2010.”

The Bank had earlier revised its forecast for economic growth downward in its July Monetary Policy Report. Remarks in its October announcement to cut interest rates suggest that it will likely cut interest rates further when it meets to set its policy interest rate on December 9th.

When the Bank cut interest rates on October 21st, the advertised conventional five-year conventional mortgage rate stood at 7.2 per cent. This is virtually unchanged from where it stood a year ago, and 0.35 per cent above where it stood when the Bank made its previous interest rate announcement on September 3rd. Competition among mortgage lenders remains stiff, but discounts off advertised mortgage interest rates remain small and in some cases have been eliminated due to the U.S. subprime mortgage meltdown and resulting global credit crunch. These continue to elevate banks’ cost of funds.

“National resale housing sales activity continues to ease from its peak last year,” said Klump. “Buyers are taking more time to shop. Unlike the U.S., Canadian homeowners are by and large under no pressure to sell, so many unsold listings are being taken off the market. New listings are coming off their peak, which is stabilizing the Canadian resale housing market.” (CREA 21/10/2008)
Canada’s MLS® housing market balance stabilizes in third quarter
Published October 15, 2008 CREA 0 Comments

The number of properties listed via the MLS® systems of Canada’s major markets was down from its peak in the third quarter of 2008, according to statistics released by The Canadian Real Estate Association (CREA). This caused the balance of sales-to-new-listings in the market for resale homes to tighten on a quarter-over-quarter basis for the first time since the beginning of 2007.

New MLS® residential listings in Canada’s major markets numbered 146,637 units on a seasonally adjusted basis in the third quarter of 2008. This is 3.3 per cent below the highest level on record, set the previous quarter. New listings eased most in Edmonton and Calgary in the third quarter, followed by declines in Vancouver and Montreal.

The balance between sales and new listings has stabilized in many major resale housing markets in recent months. The trend stands out most in Edmonton and Calgary, where a sharp drop in new listings and rising sales activity has firmed up the resale housing market considerably since the beginning of the year.

“Informed buyers and informed sellers look at the facts. And the facts right now indicate the real estate resale market is stabilizing in many markets,” says Calvin Lindberg, the President of The Canadian Real Estate Association.

“There have also been a number of initiatives that will have an impact going forward, including the government’s decision to invest $25 billion in insured mortgage pools, the recent drop in the Bank of Canada rate, and the new rules reducing the maximum amortization to 35 years instead of 40,” the CREA President adds. Those new mortgage rules go into effect October 15th. “The third quarter MLS® statistics and these developments are more factors showing the Canadian market is not following U.S. housing trends.”

Seasonally adjusted MLS® residential home sales in Canada’s major markets edged 1.5 per cent lower on a quarter-over-quarter basis to 76,391 units in the third quarter of 2008. The small decline in activity reflected fewer sales in Vancouver, which more than offset a rebound in activity in Edmonton and Calgary.

Seasonally adjusted transactions rose on a month-over-month basis in the majority of major markets in September 2008. Some 25,680 homes traded hand via the MLS® systems of Canada’s major markets on a seasonally adjusted basis in September, an increase of three per cent from levels recorded in August. The increase may reflect an influx of buyers prior to the elimination of mortgage insurance availability for those with less than a five per cent down payment.

Unadjusted (actual) sales activity was on par with September of last year, but remains below levels one year ago in some of the Canada’s most expensive housing markets. Lower sales activity in higher priced markets pulled the overall major market MLS® residential average price down by 6.2 per cent year-over-year in September, despite year-over-year average price gains in 17 of 25 major markets.

Lower activity in some of Canada’s pricier markets has weighed on the overall average price trend this year due to a decline in their weight in the average price calculation compared to last year. The price trend is similar but less dramatic for the weighted average price, in which the proportion of privately owned housing stock in each market is taken into account.

“Price declines in some of Canada’s more expensive housing markets will outweigh further price gains in other markets and continue pulling the national average price lower over the rest of the year and into 2009,” said CREA Chief Economist Gregory Klump. “Global financial market turmoil and the resulting slowdown in global economic growth will continue weighing on Canadian exports and economic growth.”

“As the Canadian housing market and pricing environment cools, the number of days on market for sales is likely to rise. By and large, Canadian home sellers are under no financial duress to sell, and a number may decide to take their home off the market should it remain unsold when the listing expires. The resulting decline in listings limits the extent to which the balance of sales and new listings will realign. Canadian homebuyers should not expect to see the kind of price correction that’s underway in the U.S., where overly indebted homeowners are selling into a housing market where foreclosures and the number of newly constructed unoccupied homes are increasing. (CREA 15/10/08)
Bank of Canada cuts interest rates
Published October 8, 2008 CREA 0 Comments

The Bank of Canada, along with the U.S. Federal Reserve, European Central Bank and others, announced an interest rate cut of 50 basis points Wednesday. The Bank of Canada’s benchmark lending rate now stands at 2.5 per cent.

The U.S. Fed cut its benchmark rate by a half point to 1.5 per cent, while the European Central Bank and central banks in the U.K., Sweden and Switzerland are also reducing rates.

The Bank of Canada said deteriorating credit conditions, weaker demand and the drop in commodity prices will “significantly” ease inflation pressures in Canada. “The intensification of the global financial crisis is having a marked impact on all countries,” the bank said in a statement, saying credit conditions in Canada have tightened significantly in recent weeks, and that slowing consumer spending and business investment will pull economic growth lower.

“Central banks are further lowering forecasts for economic growth and inflation due to intensifying fallout from the global credit crunch,” said CREA Chief Economist Gregory Klump. “Had the U.S. Federal Reserve acted alone in cutting U.S. interest rates, the Canadian dollar would have appreciated. The coordination of a surprise cut in interest rates prevented the Canadian dollar from rising. A higher Canadian dollar would have dragged Canadian exports lower at a time when global demand for them is dropping.”

Japan supported the global effort, but did not cut its benchmark rate, which already stands at 0.5 per cent.

China also announced an interest rate cut, the country’s second in three weeks. Hong Kong cut its rates by 100 basis points. The moves in China and Hong Kong were not part of the officially coordinated effort.

The central bank sets its interest rates with an eye at keeping inflation at 2 per cent. The bank said it would continue to monitor carefully economic and financial developments in determining whether “further action” is necessary.

The Bank of Canada’s decision to join the other central banks in a coordinated rate cut suggests credit conditions in Canada have deteriorated rapidly. In a speech less than two weeks ago in Montreal, the Bank of Canada governor, Mark Carney, said there were “few signs” that Canadian banks were restricting the availability of credit to households.

“There is no evidence at this point that our corporations are facing unusual credit conditions,” he told a business luncheon in Montreal on Sept. 25.

The Bank of Canada’s governors are scheduled to release their next interest rate decision on Oct. 21. (CREA 08/10/08)
New MLS® home listings down in August
Published September 30, 2008 CREA 0 Comments

OTTAWA – September 30th, 2008 – The number of properties listed via the MLS® systems of real estate boards in Canada retreated in August 2008 from record levels in the previous four months, according to statistics released today by The Canadian Real Estate Association (CREA). With new listings down from the recent peak, the resale housing market is stabilizing in most provinces.

“These days, REALTORS® in Canada face a lot of questions about the real estate market, real estate price bubbles, and the value of a home. That’s because we are at the end of an unusually active period in Canadian real estate – 2007 was a record year for many of the things we use to monitor the real estate market, including the average MLS® residential price,” said the President of The Canadian Real Estate Association, Calvin Lindberg.

“We must remember that all markets go through cycles, and remember that the national housing market is actually made up of different communities. Real estate markets are local, and every community, and every area, is different in terms of trends and pricing,” the CREA President added.

“Slower activity in some of Canada’s pricier housing markets compared to year-ago levels will continue weighing on the national average price,” explains CREA Chief Economist Gregory Klump.

“As our analysis shows, the Canadian housing market is stable and home sellers are not under pressure to sell. This is in stark contrast to the U.S. housing market, where there are a large number of distress sales. In Canada, with price gains diminishing and homebuyers taking more time to shop, the number of active MLS® listings may continue to ease so the Canadian housing market would stabilize further.”
Fewer new MLS® residential listings in August
Published September 19, 2008 CREA 0 Comments

OTTAWA – September 15, 2008 – MLS® new residential listings in Canada’s major markets retreated in August 2008 from record levels in the previous four months, according to statistics released by The Canadian Real Estate Association (CREA). With new listings down from the peak, the resale housing market is stabilizing.

After four consecutive months in which new MLS® residential listings topped 50,000 units, some 47,657 homes were listed via MLS® on a seasonally adjusted basis in August 2008. This is a decline of 5.3 per cent compared to the previous month. New listings having eased in many major centres, and now stand at their lowest level this year.

This trend has been most evident in Calgary and Edmonton, where fewer new listings and rising sales activity have stabilized the resale housing market. New listings remain most elevated relative to sales activity in Saskatoon and Vancouver, making them the most balanced major markets in the country.

Seasonally adjusted MLS® sales activity in Canada’s major markets edged down by 3.4 per cent on a month-over-month basis to 24,887 units in August 2008. The number of transactions was down in every market except Calgary, Edmonton and Regina, with Vancouver posting the largest decline in sales activity.

Sales activity in August was down from year-ago levels in the five most expensive major markets in Canada – Vancouver, Victoria, Calgary, Toronto and Edmonton. As a result, the overall major market MLS® residential average price posted another year-over-year decline in August, despite the fact that average prices recorded year-over-year gains in 20 of 25 major markets.

“When comparing statistics, remember 2007 was a record year for real estate sales in Canada,” says CREA President Calvin Lindberg. “In light of that fact, our current market can certainly be characterized as stable.”

“The Canadian market fundamentals are still solid, and mortgage rates are still at near record low levels,” the CREA President adds. “The challenge is for sellers to price their home to meet the local market realities, and for buyers to realize there is no real estate bubble that will burst and send prices to new lows.”

The average sale price of residential properties sold via MLS® was $316,052 in August. This is 5.1 per cent below where it stood in August last year. Five major markets saw year-over-year declines in average price in August: Vancouver, Victoria, Calgary, Edmonton, and Windsor.

“Price declines in the pricier major markets are pulling down the overall average price,” said CREA Chief Economist Gregory Klump. “Significantly lower sales activity in Greater Vancouver compared to a year ago means that the most expensive market in Canada now has less weight in the overall average price calculation,” he explained.

“Sales activity is down in a number of resale housing markets in Western Canada that earlier posted hefty price increases. Prices continue rising in other markets where price gains have been more modest,” said Klump.
REALTORS® welcome Conservative Party’s first-time homebuyers tax credit
Published September 18, 2008 CREA 0 Comments

OTTAWA – September 16th, 2008 – REALTORS® welcomed today’s announcement by the Conservative Party of a proposed tax credit for first-time homebuyers for intended application against closing costs of the purchase of a home.

“The issue of affordability is one that REALTORS® constantly monitor, and we welcome this initiative,” says the President of the Canadian Real Estate Association, Calvin Lindberg.

However, REALTORS® believe that the changes to the existing, well-known Home Buyers Plan that CREA has been advocating for several years will also be an effective way to address the issue of affordability for first-time buyers. CREA proposes that the federal government raise the maximum withdrawal limit in the Home Buyer’s Plan from $20,000 to $25,000. The HBP is a unique program that encourages savings, maximizes down payments and helps first-time homebuyers minimize debt over time.

The current withdrawal limit has not been changed since the program was introduced in 1992. In 2007, using the HBP, nearly 105,000 Canadians borrowed more than $1.2 billion from their personal RRSPs to use as a down payment in the purchase of their first home.

“Research has shown that, despite their enthusiasm for home ownership, first-time buyers, especially younger Canadians, find it a real challenge to finance their first home,” says Mr. Lindberg. ”We welcome any initiative that helps these buyers.”

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