TORONTO - Canadian home resales improved 41.5 per cent year-over-year to a record high for the month of October, led by rebounding consumer confidence and low mortgage rates, according to the Canadian Real Estate Association.
CREA said Monday that 42,288 homes changed hands via the Multiple Listing Service in October.
The national average price for homes listed on the MLS also reached a new high in October at $341,079. This was 20.7 per cent higher than the same month last year.
New sales records for the month were reported in one-fifth of local markets, including Toronto, Montreal and Ottawa.
The rebound in the housing market from a low in January has been remarkable and has exceeded any other segment of the economy, said Doug Porter, deputy chief economist at BMO Capital Markets.
"Housing has definitely been at the forefront of any kind of a recovery we've seen," Porter said.
"I don't think you can find a single segment of the economy, other than maybe bankruptcy lawyers, who've thrived more in the last six months or staged a more impressive turnaround."
The rebound in October was led by improved consumer confidence and low mortgage rates. When the Bank of Canada slashed its key lending rate to 0.25 per cent in the spring, banks also cut their lending rates, making it easier for consumers to finance big purchases like homes.
A report by the Canadian Association of Accredited Mortgage Professionals, released Monday, found that 40 per cent of Canadians surveyed expected house prices to go up, while 61 per cent of respondents believed now is a good time to purchase a home. This compared with 38 per cent of respondents a year ago.
Porter said the year-over-year numbers will continue to be "absolutely astonishing" in the months ahead because they're being compared to when the housing market was at its weakest. He said the month-over-month seasonally adjusted sales can be more telling, but even those were up about five per cent from September.
However, he questioned how long such strength in the housing market can last.
"Looking further out, I have a very hard time believing that these kinds of gains can be maintained much longer. I think next spring might still be relatively healthy, but I don't think we're going to continue to see these spectacular gains repeated as we move further out," he said.
"One of two things will happen to cool things: either things will get so hot that eventually rates will start creeping up, even if it's just the longer-term interest rates, or the underlying economy just won't pick up enough to justify these kinds of gains," he added.
On a seasonally adjusted basis, MLS home sales totalled 45,818 units in October, two per cent higher than the previous record set in May 2007 and 74 per cent above the recent low in January.
"Low interest rates and upbeat consumer confidence continue to release the pent-up demand that built late last year and earlier this year," stated CREA president Dale Ripplinger.
"The release of that pent-up demand has boosted national sales activity to new heights and is drawing down inventories."
The sharp rise in demand for homes has shrunk inventories to 194,994 or a seasonally adjusted 4.1 months worth, the lowest level in more than two years and 20.8 per cent below the peak reached a year ago. This is the sixth month in a row in which inventories are down from year-ago levels.
"When you look at the amount of unsold homes that are on the market, it's very low given the level of sales, so this is a very tight, healthy market," Porter said.
Seasonally adjusted new listings on MLS were slightly higher in October compared to September at 65,148 units. New listings peaked in May 2008, then declined until March 2009, and have remained relatively steady since then.
"New listings are still expected to rise in the coming months in response to headline average price increases," stated CREA chief economist Gregory Klump.
"New supply dropped dramatically in December last year and earlier this year in response to a difficult pricing environment. Sellers who moved to the sidelines should be drawn back to the market as prices rise further over the rest of the year and in early 2010."
The positive numbers in October prompted CREA to revise its home resales forecast for the rest of 2009 and 2010. CREA now forecasts home resales will reach 460,200 units in 2009, up 6.6 per cent from last year, while it expects sales activity to rise seven per cent to 492,300 units in 2010. This would make 2010 the second highest year on record for home resales.
The full-year national average home price is expected to climb 4.2 per cent in 2009 to $317,900, and a further 4.7 per cent in 2010.