Sales of existing homes in Canada’s major markets set new annual records in 2004, according to The Canadian Real Estate Association.
Home sales via the Multiple Listing Service in Canada’s major markets continued to return to more normal levels in December 2004. Seasonally adjusted existing-home sales numbered 25,595 units in December, which represents a decline of 1.7 percent compared to the previous month. The number of sales transactions exceeded 25,000 units for the 11th month in a row – their longest monthly run above that level ever.
Housing demand remained unusually strong throughout 2004 and major-market MLS home sales set a new annual record in 2004 at 316,386 units. Annual sales were up 2.7 percent over the previous record set in 2003. It was the sixth consecutive year in which major-market unit sales surpassed all previous annual records. Sales activity surpassed all previous annual records in a number of major markets, including Calgary, Edmonton, Toronto, Hamilton, London, Ottawa and St. John’s.
Low mortgage interest rates also encouraged many existing homeowners to move up, which pushed new listings to 503,217 units. New listings rose by 8.6 percent compared to last year and exceeded the previous record set in 1990 by 2.3 percent. Homes remained in short supply despite the annual increase in listings. A shortage of existing homes available for sale supported new-home construction, which reached its highest level in 17 years.
The shortage of listings also caused the major-market MLS residential average price to reach a new annual record for the fifth year in a row at $245,149 – some 10.1 percent above its previous record set in 2003. Average price shattered all previous records in almost every major market. Seasonally adjusted new listings dropped by 7 percent from the previous month to 39,433 units, causing the resale housing market to tighten. This resulted in a year-over-year average price increase of 11.8 percent – its biggest increase since May 2004. “Although the market tightened late last year, it is expected to become more balanced in 2005,” said CREA’s chief executive officer, Pierre Beauchamp.
“After a year of remarkably strong activity, sales are trending toward more normal levels,” said CREA’s chief economist, Gregory Klump. “Less frenzied sales activity will likely encourage many existing homeowners looking to move up to list their home on the Multiple Listing Service to market their home. An increase in new listings and a return to a more normal pace of activity will cause the resale housing market to become more balanced over 2005. A more balanced market will also keep a lid on average price increases.”
Klump added that average price increases are forecast to moderate beginning in the spring of 2005, since prices surged in April 2004 and have since held fairly steady. Once that surge is no longer a factor in year-over-year comparisons, average price increases over the rest of 2005 will range between three and five percent.
“Because economic growth slowed in the fourth quarter of 2004 and its near-term prospects have become clouded by a higher Canadian dollar, job growth may soon soften. Nonetheless, additional full-time job creation posted during the second half of 2004 will continue to support housing demand in the first half of 2005,” Klump said.
“Job growth in the second half of 2004 largely benefited more mature segments of the workforce. In the absence of renewed job growth for younger workers, move up activity may ease this year due to a decrease in the number of younger buyers looking to buy their first home,” he added. “Although slower job growth could cause housing demand to soften, the continuation of low interest rates and resilient consumer confidence will keep housing activity in good health this year.”
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