OTTAWA -- The Bank of Canada Monday dismissed talk of a housing bubble in Canada as "premature," warning that calls for higher interest rates now in an effort to temper real-estate markets would be akin to "dousing" the economic recovery with cold water.
It delivered this message through a speech in Edmonton, and marked the first time the central bank tried to address directly myriad concerns that the country's real-estate market is appreciating too quickly, too soon.
"Recent house price increases do not appear to be out of line with the underlying supply-demand fundamentals," David Wolf, an advisor to the governor, Mark Carney, said in prepared remarks.
Data indicate existing-home prices have climbed 21% from a year ago while sales volume has surged 41%, prompting observers to indicate a housing bubble was underway due to record-low interest rates. New figures released Monday suggest housing starts rose 5.9% to a seasonally adjusted rate of 174,500 units in December, easily beating economists' average forecast of 160,000.
Mr. Wolf said housing bubbles, such as the one the United States experienced last decade, are usually fuelled by credit expansion, as borrowers and lenders "take false comfort from exaggerated house prices."
The current rally, during which existing-home sales have climbed more than 40% on a year-over-year basis as of November and prices have surged nearly 20%, is largely due to what Mr. Wolf described as "temporary factors," such as low interest rates and pent-up demand. Further, some buying has been "pulled forward," as people realize this is a once-in-a-lifetime opportunity to acquire property with historically cheap financing.
These factors cannot continue to drive home sales and prices, Mr. Wolf said.
"Thus, we see the housing market as requiring vigilance, but not alarm," said Mr. Wolf, who delivered the speech on behalf of deputy governor Timothy Lane.
He said the central bank is monitoring housing closely, and warned of the implications of using monetary policy to cool the market.
"If the bank were to raise interest rates to cool the housing market now - when inflation is expected to remain below target for the next year and a half - we would, in essence, be dousing the entire Canadian economy with cold water, just as it emerges from recession. As a result, it would take longer for economic growth to return to potential and for inflation to get back to target," he said.
The Bank of Canada has pledged to keep its benchmark rate at a record low 0.25% until July in an effort to foster growth and bring inflation to the central bank's preferred 2% target (which is expected in the second half of 2011).
Instead, regulatory changes - from changes to banks' capital requirements to the terms and conditions for mandatory mortgage insurance - are the preferred route to deal with housing-market excess, should concerns mount. This largely repeats the view forwarded last week by Ben Bernanke, chairman of the U.S. Federal Reserve.
Jim Flaherty, the Minister of Finance, has indicated he is concerned about the record levels of household debt and could introduce regulatory changes to address it, such as more stringent requirements to get mortgage insurance, which is a key condition required before banks agree to extend financing for a home purchase. Analysts say such a change could be included in the next federal budget, to be tabled in early March.
Economists at Scotia Capital said in a note the speech suggested the central bank was becoming "uncomfortable" with the "lightning-rod bubble talk" in the marketplace.
Nonetheless, the central bank "flagged the temporary nature of many of the factors driving recent strengths," they said.
Michael Gregory, senior economist at BMO Capital Markets, said mortgage growth has been rapid - around 7% on a year-over-year and three-month basis - but remains in single-digit territory and below historical peaks. Still, "a few more months of rapid credit growth and the [central bank's] conclusion may be very different."
pvieira@nationalpost.com
Tuesday, January 12, 2010
Thursday, December 17, 2009
Rates to rise, Bank of Canada chief warns
OTTAWA – Bank of Canada governor Mark Carney issued a caution toCanadians and the chartered banks Wednesday: interest rates are goingup and they should take care not to get caught out.
Expanding onprevious warnings, the bank governor told a business audience inToronto that the current low interest rate environment may be luringCanadians to borrow too much, and banks to extend loans they will laterregret.
Canadians have taken on more debt even during the recession, which is unusual, Carney said.
But while Canadians may be able to afford the added debt burden nowwhen interest rates are at historic lows, they may get caught shortwhen rates return to more normal levels.
"The combination ofsustained growth of household debt relative to income and a risinginterest rate environment could increase the vulnerability ofhouseholds to an adverse shock," he said in notes on the speechreleased by the central bank in Ottawa.
The bank governor didnot say when he expects interest rates to start rising, althougheconomists believe Carney will make his first move on his lower-bound0.25 per cent policy rate in mid-2010. That would be after the bank'sconditional commitment to stand still on the rate until the end of June.
It is not the first time Carney and the central bank have voiced suchconcerns, most recently last Thursday in the central bank's semi-annualFinancial Systems Review, which cited household debt as the number onerisk factor to Canada's economic well-being.
Since, there hasbeen more evidence that Canadians have not paid heed. The Canadian RealEstate Association reported Tuesday that Canadians continued to snap uphouses at near-record levels, increasing their purchases of resalehomes by 73 per cent in November.
Carney said there are already signs that Canadians are getting in over their heads.
He notes that personal bankruptcies jumped by 41 per cent in theJuly-to-September period from a year ago and are now at the highestlevel as a proportion of the population since 1991.
As well,delinquency rates are rising and the proportion of mortgage payments inarrears by three months or more have increased by 50 per cent in thepast year.
The Canadian economy is particularly vulnerable tohousehold defaults since consumers are expected to be the key driver ofeconomic recovery, the governor said.
But Carney added that while Canadian consumers have a responsibility to avoid credit risks, so do financial institutions.
"Financial institutions should actively monitor risk stemming fromhouseholds and not take comfort from mortgage insurance and pastperformance of household credit," he said.
"As our simulationssuggest, the overall credit profile of Canadian households could wellshift if debt continues to grow at current rates."
Carney noted that he still believes the Canadian economy is coming out of the recession and will grow in the next few years.
He said he expects Canada to outperform the other G7 countries with athree per cent advance in 2010, but said growth going forward will bemore modest than previous post-recession bounce-backs.
Expanding onprevious warnings, the bank governor told a business audience inToronto that the current low interest rate environment may be luringCanadians to borrow too much, and banks to extend loans they will laterregret.
Canadians have taken on more debt even during the recession, which is unusual, Carney said.
But while Canadians may be able to afford the added debt burden nowwhen interest rates are at historic lows, they may get caught shortwhen rates return to more normal levels.
"The combination ofsustained growth of household debt relative to income and a risinginterest rate environment could increase the vulnerability ofhouseholds to an adverse shock," he said in notes on the speechreleased by the central bank in Ottawa.
The bank governor didnot say when he expects interest rates to start rising, althougheconomists believe Carney will make his first move on his lower-bound0.25 per cent policy rate in mid-2010. That would be after the bank'sconditional commitment to stand still on the rate until the end of June.
It is not the first time Carney and the central bank have voiced suchconcerns, most recently last Thursday in the central bank's semi-annualFinancial Systems Review, which cited household debt as the number onerisk factor to Canada's economic well-being.
Since, there hasbeen more evidence that Canadians have not paid heed. The Canadian RealEstate Association reported Tuesday that Canadians continued to snap uphouses at near-record levels, increasing their purchases of resalehomes by 73 per cent in November.
Carney said there are already signs that Canadians are getting in over their heads.
He notes that personal bankruptcies jumped by 41 per cent in theJuly-to-September period from a year ago and are now at the highestlevel as a proportion of the population since 1991.
As well,delinquency rates are rising and the proportion of mortgage payments inarrears by three months or more have increased by 50 per cent in thepast year.
The Canadian economy is particularly vulnerable tohousehold defaults since consumers are expected to be the key driver ofeconomic recovery, the governor said.
But Carney added that while Canadian consumers have a responsibility to avoid credit risks, so do financial institutions.
"Financial institutions should actively monitor risk stemming fromhouseholds and not take comfort from mortgage insurance and pastperformance of household credit," he said.
"As our simulationssuggest, the overall credit profile of Canadian households could wellshift if debt continues to grow at current rates."
Carney noted that he still believes the Canadian economy is coming out of the recession and will grow in the next few years.
He said he expects Canada to outperform the other G7 countries with athree per cent advance in 2010, but said growth going forward will bemore modest than previous post-recession bounce-backs.
Monday, December 7, 2009
Housing affordability breaks improving trend
In a report published November 25, 2009 RBC Economics Research revealed that the 18 month long improvement in Canadian housing affordability came to an end in the third quarter of 2009. Despite this reversal, homes are still much more affordable than they were a year ago and, nationally, affordability is in line with levels seen in 2006 when the housing market was shifting into high gear.
The deterioration in housing affordability was largely due to slight increases in key mortgage rates as well as gains in property values.
Sales reach historic high
By October 2009, the number of homes sold through the Multiple Listing Service in Canada had not only recovered the ground lost during the downturn, but had climbed an astonishing 74% since January to reach a historic high. As strong demand has outpaced the supply of homes for sale, market conditions have tightened.
In some metropolitan markets we are seeing evidence of bidding wars reappearing, however the rise in the cost of homeownership overall in Canada has been modest in the third quarter.
A sign to act?
What should this mean to Canadians? For people who have been timing their entry into the housing market, or for those looking to upgrade their homes, this reversal of trend may be a sign to act. With interest rates at near record lows, now more than ever, prospective homebuyers should speak to a Mortgage Specialist so they can feel confident about buying a home that they not only love, but one they can afford. In addition, by getting pre-approved, prospective homebuyers can shop with confidence when looking at homes that are within their budget.
RBC publishes free research information about housing, including pricing trends by province and city, in the RBC Economics Housing Trends and Affordability Report. It’s easy to stay informed. Register at www.rbc.com/economics for automatic email delivery of new reports.
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.ca
The deterioration in housing affordability was largely due to slight increases in key mortgage rates as well as gains in property values.
Sales reach historic high
By October 2009, the number of homes sold through the Multiple Listing Service in Canada had not only recovered the ground lost during the downturn, but had climbed an astonishing 74% since January to reach a historic high. As strong demand has outpaced the supply of homes for sale, market conditions have tightened.
In some metropolitan markets we are seeing evidence of bidding wars reappearing, however the rise in the cost of homeownership overall in Canada has been modest in the third quarter.
A sign to act?
What should this mean to Canadians? For people who have been timing their entry into the housing market, or for those looking to upgrade their homes, this reversal of trend may be a sign to act. With interest rates at near record lows, now more than ever, prospective homebuyers should speak to a Mortgage Specialist so they can feel confident about buying a home that they not only love, but one they can afford. In addition, by getting pre-approved, prospective homebuyers can shop with confidence when looking at homes that are within their budget.
RBC publishes free research information about housing, including pricing trends by province and city, in the RBC Economics Housing Trends and Affordability Report. It’s easy to stay informed. Register at www.rbc.com/economics for automatic email delivery of new reports.
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.ca
Thursday, December 3, 2009
Strong demand carries into late fall
Wednesday, December 2, 2009
VANCOUVER - Home values continued to edge upward in November as demand in the Greater Vancouver housing market remains well above seasonal norms.
Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 12.4 per cent to $557,384 from $495,704 in November 2008. This price, however, remains down 1.9 per cent from the most recent high point in the market in May 2008 when the residential benchmark price sat at $568,411.
“This unseasonably high level of demand can be attributed in large part to low interest rates, but it also speaks to the diverse range of housing options available in Greater Vancouver,” Scott Russell, Real Estate Board of Greater Vancouver (REBGV) president said. “Prospective homebuyers today have more options at different price levels than ever before."
The REBGV reports that residential property sales in November were the third highest volume ever recorded in Greater Vancouver for that month. Sales in the region totalled 3,083 in November 2009, an increase of 252.7 per cent compared to November 2008 when 874 sales were recorded and a 16.8 per cent decrease compared to the 3,704 sales recorded in October 2009.
“We are experiencing a brisker than normal market for this time of year, although we have begun to see a reduction in the number of homes listed for sale, which is normal as we head into the holiday season,” Russell said.
New listings for detached, attached and apartment properties in Greater Vancouver totalled 3,653 in November 2009. This represents a 21.3 per cent increase compared to November 2008 when 3,012 new units were listed, and a 26.6 per cent decline compared to October 2009 when 4,977 properties were listed on the Multiple Listing Service® (MLS®) in Greater Vancouver.
At 11,039, the total number of property listings on the MLS® decreased 8.6 per cent in November compared to last month and declined 39 per cent from this time last year.
In contrast to this year, note that November 2008 was the lowest selling November in Greater Vancouver in 27 years.
Sales of detached properties increased 261.5 per cent to 1,164 from the 322 detached sales recorded during the same period in 2008. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties increased 13.6 per cent from November 2008 to $757,209.
Sales of apartment properties in November 2009 increased 240.5 per cent to 1,396 compared to 410 sales in November 2008. The benchmark price of an apartment property increased 11.6 per cent from November 2008 to $381,945.
Attached property sales in November 2009 are up 268.3 per cent to 523, compared with the 142 sales in November 2008. The benchmark price of an attached unit increased 10.2 per cent between Novembers 2008 and 2009 to $469,686.
The Real Estate industry is a key economic driver in British Columbia. In 2008, 24,626 homes changed hands in the Board's area generating $1.03 billion in spin-offs. The Real Estate Board of Greater Vancouver is an association representing more than 9,400 REALTORS®. The Real Estate Board provides a variety of membership services, including the Multiple Listing Service®.
VANCOUVER - Home values continued to edge upward in November as demand in the Greater Vancouver housing market remains well above seasonal norms.
Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 12.4 per cent to $557,384 from $495,704 in November 2008. This price, however, remains down 1.9 per cent from the most recent high point in the market in May 2008 when the residential benchmark price sat at $568,411.
“This unseasonably high level of demand can be attributed in large part to low interest rates, but it also speaks to the diverse range of housing options available in Greater Vancouver,” Scott Russell, Real Estate Board of Greater Vancouver (REBGV) president said. “Prospective homebuyers today have more options at different price levels than ever before."
The REBGV reports that residential property sales in November were the third highest volume ever recorded in Greater Vancouver for that month. Sales in the region totalled 3,083 in November 2009, an increase of 252.7 per cent compared to November 2008 when 874 sales were recorded and a 16.8 per cent decrease compared to the 3,704 sales recorded in October 2009.
“We are experiencing a brisker than normal market for this time of year, although we have begun to see a reduction in the number of homes listed for sale, which is normal as we head into the holiday season,” Russell said.
New listings for detached, attached and apartment properties in Greater Vancouver totalled 3,653 in November 2009. This represents a 21.3 per cent increase compared to November 2008 when 3,012 new units were listed, and a 26.6 per cent decline compared to October 2009 when 4,977 properties were listed on the Multiple Listing Service® (MLS®) in Greater Vancouver.
At 11,039, the total number of property listings on the MLS® decreased 8.6 per cent in November compared to last month and declined 39 per cent from this time last year.
In contrast to this year, note that November 2008 was the lowest selling November in Greater Vancouver in 27 years.
Sales of detached properties increased 261.5 per cent to 1,164 from the 322 detached sales recorded during the same period in 2008. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties increased 13.6 per cent from November 2008 to $757,209.
Sales of apartment properties in November 2009 increased 240.5 per cent to 1,396 compared to 410 sales in November 2008. The benchmark price of an apartment property increased 11.6 per cent from November 2008 to $381,945.
Attached property sales in November 2009 are up 268.3 per cent to 523, compared with the 142 sales in November 2008. The benchmark price of an attached unit increased 10.2 per cent between Novembers 2008 and 2009 to $469,686.
The Real Estate industry is a key economic driver in British Columbia. In 2008, 24,626 homes changed hands in the Board's area generating $1.03 billion in spin-offs. The Real Estate Board of Greater Vancouver is an association representing more than 9,400 REALTORS®. The Real Estate Board provides a variety of membership services, including the Multiple Listing Service®.
Monday, November 30, 2009
Making sense of mortgage rates in today’s economy
Many prospective homebuyers are wondering what has happened to mortgage rates in 2009, and where they may go from here. RBC Economics Research recently updated its’ outlook, and here is what the group has to report.
Since hitting a low in January of 2009, longer-term interest rates have trended higher with the move accelerating in July. The prospect that the worst is over for the global economy is giving investors the confidence to venture out of low-return fixed income securities and seek higher risk investments. While we expect many bumps on the road to recovery we still see potential for a very modest decrease in long-term rates in the final quarter of this year.
Outlook for the future
Momentum in the global economy appears to be changing. Leading indicators currently point to the end of economic contraction for the industrialized world in the third quarter of 2009. Stimulus from central banks, combined with government fiscal stimulus packages, is expected to support a fledgling recovery that is forecast to build momentum in 2010.
Until this recovery is well underway, no changes to policy rates are likely. The Bank of Canada is expected to maintain the status quo until mid-2010. Once the recovery is well established, central banks will normalize their policy rates, and interest rates are likely to increase.
Fixed vs. variable rate mortgages
One of the biggest decisions homebuyers face is choosing between a fixed or variable rate mortgage. This is not a simple decision, which is why many people are looking for advice to help them decide which mortgage interest type is best for them, based on their personal circumstances. I can help homebuyers and homeowners decide which option best fits their situation and risk tolerance.
Mortgage rates continue to trend at historic lows, despite the fact that fixed rates have edged up recently. In this environment, people who are comfortable without a guaranteed rate are opting for a variable rate mortgage. Such a strategy could result in considerable interest savings.
What homebuyers choose should depend on how they feel about rate fluctuations and their cash flow. For example, a first time homebuyer may want assurance that the rate, payment and repayment schedule will not change, and may be wise to opt for a fixed term. A homebuyer who is not concerned about rate fluctuations may want to take advantage of today’s low variable rates in a bid to save more on mortgage interest over the long term.
Today’s flexible mortgage products let you bridge the gap between these strategies. For example, the RBC Homeline Plan lets homebuyers split their mortgages and enjoy the advantages of both variable and fixed rates within a credit limit of up to 80% of the value of the home. The variable portion offers potential long-term savings, while the fixed rate portion offers rate protection. The dividing line is entirely up to the homeowner.
RBC has many resources available:
· Fixed or variable rate – know your options
· Consider the security of a fixed rate mortgage
· The advantages of a variable rate mortgage
Get more information
RBC publishes free research information. It’s easy to stay informed. Register at www.rbc.com/economics for automatic email delivery of new reports.
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.com
Since hitting a low in January of 2009, longer-term interest rates have trended higher with the move accelerating in July. The prospect that the worst is over for the global economy is giving investors the confidence to venture out of low-return fixed income securities and seek higher risk investments. While we expect many bumps on the road to recovery we still see potential for a very modest decrease in long-term rates in the final quarter of this year.
Outlook for the future
Momentum in the global economy appears to be changing. Leading indicators currently point to the end of economic contraction for the industrialized world in the third quarter of 2009. Stimulus from central banks, combined with government fiscal stimulus packages, is expected to support a fledgling recovery that is forecast to build momentum in 2010.
Until this recovery is well underway, no changes to policy rates are likely. The Bank of Canada is expected to maintain the status quo until mid-2010. Once the recovery is well established, central banks will normalize their policy rates, and interest rates are likely to increase.
Fixed vs. variable rate mortgages
One of the biggest decisions homebuyers face is choosing between a fixed or variable rate mortgage. This is not a simple decision, which is why many people are looking for advice to help them decide which mortgage interest type is best for them, based on their personal circumstances. I can help homebuyers and homeowners decide which option best fits their situation and risk tolerance.
Mortgage rates continue to trend at historic lows, despite the fact that fixed rates have edged up recently. In this environment, people who are comfortable without a guaranteed rate are opting for a variable rate mortgage. Such a strategy could result in considerable interest savings.
What homebuyers choose should depend on how they feel about rate fluctuations and their cash flow. For example, a first time homebuyer may want assurance that the rate, payment and repayment schedule will not change, and may be wise to opt for a fixed term. A homebuyer who is not concerned about rate fluctuations may want to take advantage of today’s low variable rates in a bid to save more on mortgage interest over the long term.
Today’s flexible mortgage products let you bridge the gap between these strategies. For example, the RBC Homeline Plan lets homebuyers split their mortgages and enjoy the advantages of both variable and fixed rates within a credit limit of up to 80% of the value of the home. The variable portion offers potential long-term savings, while the fixed rate portion offers rate protection. The dividing line is entirely up to the homeowner.
RBC has many resources available:
· Fixed or variable rate – know your options
· Consider the security of a fixed rate mortgage
· The advantages of a variable rate mortgage
Get more information
RBC publishes free research information. It’s easy to stay informed. Register at www.rbc.com/economics for automatic email delivery of new reports.
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.com
Special rate on RBC Homeline Plan® lines of credit
On October 21st, 2009, RBC Royal Bank® announced a special rate on new RBC Homeline Plan lines of credit.
2.75 per cent RBC Prime + .50% (decrease of 0.40 per cent)
With the economic changes over the past year, this is a perfect time for Canadians to reassess their home financing arrangements and get advice that can help save them money.
Now more than ever, Canadians can use a break when it comes to financing what is often their largest purchase – their home. That’s why we are happy to be able to offer a reduced rate on the RBC Homeline Plan line of credit, giving Canadians access to the best priced credit line in the market today.
The RBC Homeline Plan lending product provides homeowners the flexibility to split their home financing into various mortgage segments to include both fixed and variable rate mortgages, coupled with one or more lines of credit. Homeowners can use the plan to help diversify their interest rates and lower their overall borrowing costs.
http://services.rbc.com/advice/video.html
Special Offer http://www.rbcroyalbank.com/products/mortgages/newsletter/RBC_MOR_9636C.pdf
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.com
2.75 per cent RBC Prime + .50% (decrease of 0.40 per cent)
With the economic changes over the past year, this is a perfect time for Canadians to reassess their home financing arrangements and get advice that can help save them money.
Now more than ever, Canadians can use a break when it comes to financing what is often their largest purchase – their home. That’s why we are happy to be able to offer a reduced rate on the RBC Homeline Plan line of credit, giving Canadians access to the best priced credit line in the market today.
The RBC Homeline Plan lending product provides homeowners the flexibility to split their home financing into various mortgage segments to include both fixed and variable rate mortgages, coupled with one or more lines of credit. Homeowners can use the plan to help diversify their interest rates and lower their overall borrowing costs.
http://services.rbc.com/advice/video.html
Special Offer http://www.rbcroyalbank.com/products/mortgages/newsletter/RBC_MOR_9636C.pdf
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.com
Thursday, August 20, 2009
Housing Sales Rocket In July
Canada’s housing market boomed in July as low interest rates and improving economic confidence sent sales of existing homes to a record for the month, despite generally weak economic conditions.
The remarkable turnaround from an almost frozen market at the start of the year has economists stunned, and while they predict activity will level out soon, the risk is continued low interest rates will begin to stoke a house price bubble.
“We can’t rule it out,” Douglas Porter, the deputy chief economist at BMO Capital Markets, said of the possibility of a bubble. However, he said the scenario was hard to fathom given the underlying weakness in the economy. Even so, that weakness to date has not prevented a strong rebound in the existing housing market, which declined steadily throughout 2008 and hit a decade low in January.
Home resales increased by 18.2% in July compared with a year earlier, to reach 50,270 units -- the highest July sales result on record, Canadian Real Estate Association figures showed yesterday. At this pace, the housing market is on track to be even hotter than it was in 2007, which was a record year. Seasonally adjusted sales have risen for six straight months to be up 61.2% since January and are now just 1.4% below the peak in May 2007.
But despite the spectacular gain, the level of activity in the first seven months of this year remains 6% lower than in 2008 when activity had already begun to decline. Mr. Porter said some of the rise in the month was a result of sales that had been held back from the start of the year because of the weak market conditions.
However, homebuyers have swarmed back into the market because of low interest rates and more affordable house prices.
“Homebuyers recognize that interest rates and prices have bottomed out, and are taking advantage of excellent affordability before prices and interest rates move higher,” said Dale Ripplinger, the president of CREA.
A five-year fixed rate mortgage, the most popular product among consumers, is still available for under 4% at some financial institutions. Variable rate mortgages, tied to prime, remain in the 3% range and are not expected to rise until June. The Bank of Canada has promised to keep the benchmark interest rate at a record low 0.25% until mid-2010, provided inflation does not begin to rise.
The strength in the market has been felt right across the country. Vancouver sales last were up 90% from a year ago, while sales climbed 28% in Toronto and 28% in Edmonton. The strong demand in the country’s highest-priced markets has to some degree skewed the average price higher. The average price of a home sold on the Multiple Listing Service last month rose 7.6% from a year earlier to $326,832.
The strength in the resales market has not been echoed in the price of new homes, which fell 3.3% in June compared to a year earlier, Statistics Canada figures showed Wednesday.
Part of the pressure on prices has come from a decline in supply, which has fallen for seven straight months. New listings in July were down 13% from a year earlier to 73,444.
Economists are skeptical the housing market will be able to continue to post such strong growth.
“After improving markedly, affordability will deteriorate in coming quarters, and unemployment will continue to rise,” said Pascal Gauthier, an economist at TD Bank Financial Group. “New listings might well start rising again too. Combined, a larger supply and a softening in demand should cool prices in a delayed fashion.”
The remarkable turnaround from an almost frozen market at the start of the year has economists stunned, and while they predict activity will level out soon, the risk is continued low interest rates will begin to stoke a house price bubble.
“We can’t rule it out,” Douglas Porter, the deputy chief economist at BMO Capital Markets, said of the possibility of a bubble. However, he said the scenario was hard to fathom given the underlying weakness in the economy. Even so, that weakness to date has not prevented a strong rebound in the existing housing market, which declined steadily throughout 2008 and hit a decade low in January.
Home resales increased by 18.2% in July compared with a year earlier, to reach 50,270 units -- the highest July sales result on record, Canadian Real Estate Association figures showed yesterday. At this pace, the housing market is on track to be even hotter than it was in 2007, which was a record year. Seasonally adjusted sales have risen for six straight months to be up 61.2% since January and are now just 1.4% below the peak in May 2007.
But despite the spectacular gain, the level of activity in the first seven months of this year remains 6% lower than in 2008 when activity had already begun to decline. Mr. Porter said some of the rise in the month was a result of sales that had been held back from the start of the year because of the weak market conditions.
However, homebuyers have swarmed back into the market because of low interest rates and more affordable house prices.
“Homebuyers recognize that interest rates and prices have bottomed out, and are taking advantage of excellent affordability before prices and interest rates move higher,” said Dale Ripplinger, the president of CREA.
A five-year fixed rate mortgage, the most popular product among consumers, is still available for under 4% at some financial institutions. Variable rate mortgages, tied to prime, remain in the 3% range and are not expected to rise until June. The Bank of Canada has promised to keep the benchmark interest rate at a record low 0.25% until mid-2010, provided inflation does not begin to rise.
The strength in the market has been felt right across the country. Vancouver sales last were up 90% from a year ago, while sales climbed 28% in Toronto and 28% in Edmonton. The strong demand in the country’s highest-priced markets has to some degree skewed the average price higher. The average price of a home sold on the Multiple Listing Service last month rose 7.6% from a year earlier to $326,832.
The strength in the resales market has not been echoed in the price of new homes, which fell 3.3% in June compared to a year earlier, Statistics Canada figures showed Wednesday.
Part of the pressure on prices has come from a decline in supply, which has fallen for seven straight months. New listings in July were down 13% from a year earlier to 73,444.
Economists are skeptical the housing market will be able to continue to post such strong growth.
“After improving markedly, affordability will deteriorate in coming quarters, and unemployment will continue to rise,” said Pascal Gauthier, an economist at TD Bank Financial Group. “New listings might well start rising again too. Combined, a larger supply and a softening in demand should cool prices in a delayed fashion.”
Subscribe to:
Posts (Atom)