Eric Beauchesne, CanWest News Service
Published: Saturday, April 29, 2006
OTTAWA - Home sales and prices hit all-time highs in the first quarter of this year, according to a report Friday which will add to puzzlement, and possibly more inflation worries, at the Bank of Canada.
There were 125,142 existing homes sold from January through March, up 2.4 per cent from the fourth quarter of last year, and 0.2 per cent above the previous record high set in the third quarter of last year, the Canadian Real Estate Association said.
Earlier in the week, Bank of Canada governor David Dodge said ``we're a little bit surprised'' at the strength of the housing market considering the steady climb in interest rates and prices since last summer.
And real estate association chief economist Gregory Klump agreed it was a surprise that sales hit new record highs.
``Rising household incomes and upbeat consumer confidence are keeping resale housing activity on a tear, even with rising home prices and interest rates,'' Klump said.
The industry association reported sales reached their highest level of any quarter on record for both the number of units sold and the total dollar volume. The value of sales reached $33.4 billion, a 5.8 per cent increase from the final quarter of 2005, and the highest level ever, with records set in most provinces.
New quarterly sales records were set in Alberta, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
The quarterly surge in sales was despite a decline in March, when sales slipped 1.4 per cent from February, which was the second highest month of sales on record. British Columbia, Alberta and Ontario led the decline in sales, while sales rose in Quebec, New Brunswick, and in Nova Scotia where sales hit a record for the month of March.
While sales slipped in March, the average home price continued to rise to reach a record $274,163, up 12.4 per cent from a year earlier. The average price in the quarter was up 12.1 per cent from the same quarter in 2005, which was the steepest increase since the 1980s housing boom, which eventually went bust.
In March, the average price of a home was at an all-time high in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Prince Edward Island. And during the quarter, the average price was at an all-time high in every province except Quebec.
The average price of a home sold in March was highest in British Columbia at $383,712, up nearly 20 per cent from a year earlier. The steepest increase in the average price was in Alberta at 24.7 per cent to $267,641.
While most analysts continue to predict housing sales should eventually slow this year and price increases moderate, they say that unlike during the 1980s, there is no housing bubble to burst.
``Interest rates are widely expected to be near their peak,'' Klump noted. ``The continued ability to negotiate rates is also helping to keep sales activity high by keeping monthly payments down and affordability reasonable.''
The posted five-year closed mortgage rate is now 6.6 per cent, which is up less than a full percentage point from a low of 5.7 per cent last July, before the Bank of Canada resumed raising rates.
``It's not a substantial increase,'' Klump said, noting a recent survey by mortgage brokers found even with the higher rates, families are finding their housing payments manageable.