Home buyers rushed into the market late last year to take advantage of low interest rates and a recovering economy, making 2009 the fourth busiest year in Canadian real estate history.
A total of 465,251 houses were sold on the Canadian Real Estate Association-owned Multiple Listing Service in 2009, up 7.7 from 2008.
Sales were 10.7 per cent lower than the industry's best year in 2007.
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In its monthly update, CREA said 27,744 units were sold in December, 72 per cent more than last December when the recession essentially stopped buyers cold.
A total of 137,957 homes traded on a seasonally adjusted basis in the fourth quarter, up 2.6 per cent from the previous record set in the first quarter of 2007.
The fourth-quarter surge was needed to push the industry past 2008 levels, with a dismal first quarter threatening to dampen annual growth.
Despite year-over-year increases in the second and third quarters, year-to-date activity was still trailing 2008 levels at the end of September. However, sales increased 59 per cent year over year in the fourth quarter.
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“Sales activity in 2009 came in like a lamb and went out like a lion,” said CREA president Dale Ripplinger. “The continuation of unusually low interest rates may keep national sales activity near current levels over the coming months, as will a blip in housing demand in Ontario and British Columbia from home buyers motivated to beat the introduction of the HST.”
The national average price climbed 5 per cent in 2009, to a record $320,333. Year over year in December the gains are more striking, up 19 per cent.
The boom has policy makers concerned about an asset bubble forming, as easy money encourages consumers to take out more debt than they can afford in order to finance their dream homes.
The fear is that when interest rates inevitably rise, these homeowners will be priced out of their homes when their mortgages come up for renewal. While the Bank of Canada has said it is premature to suggest a bubble is forming, Finance Minister Jim Flaherty said he would look into increasing the minimum down payment required (currently 5 per cent) and shortening amortization periods (currently 35 years).
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The Canadian Association of Accredited Mortgage Professionals issued a report this week that could dispel the notion of risky borrowers, however, suggesting that home buyers are being cautious when taking out new mortgages.
The group studied 40,000 loans issued in 2009, and found that 86 per cent of them were fixed-term. These are considered less risky than variable-rate terms, because the homeowner is locked in at one rate for a set amount of time, typically five years.
“The vast majority of Canadian mortgage borrowers are not taking on undue risks,” said Jim Murphy, the association's president. “They have factored rising interest rates in to their mortgage decisions.”
CREA economist Gregory Klump said a rush of new supply to the market as homeowners put their houses for sale to take advantage of high levels of interest will help to cool the market.
New listings posted a year-over-year gain in December for the first time in a year, with 33,090 properties made available.
There is still a dearth of inventory, however. New listings in 2009 were down 12.6 per cent from the annual peak in 2008.
Nationally, there were 4.1 months of inventory in December, 2009, on a seasonally adjusted basis, the lowest level in more than two years.
“CREA's latest statistics will no doubt spark further bubble talk amongst the usual suspects,” Mr. Klump said. “Cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer. Further expected increases in supply will also take some steam out of the market.
“A more balanced market will result in smaller price increases in the second half of the year, but a massive decline in demand similar to what we saw in late 2008 and early 2009 seems as unlikely as a massive spike in supply.”
Toronto — Globe and Mail Update Published on Friday, Jan. 15, 2010 9:49AM EST Last updated on Friday, Jan. 15, 2010 12:33PM EST