MLS® market activity in May 2007 set a new benchmark across the country and in Winnipeg.
The question now being posed is how long can this record-setting activity continue?
Significant price increases in various markets and a modest rise in mortgage rates are bound to result in some adjustments that may curtail sales records across the country.
It should also be noted that not all MLS® markets are created equal — some are subject to different economic factors, house prices, inventory situations and even government regulations. For example, government-imposed rent controls in Manitoba discourage investment in the rental property which results in increased pressure being exerted on the resale market as more people turn to home buying rather than renting.
Two real estate markets — Winnipeg and Edmonton — provide good examples of records being broken.
In Winnipeg, May 2007 was absolutely the best month ever. MLS® sales broke through the previously unattainable 1,500 monthly level with 1,652 MLS® sales, a 12 per cent increase over the second best month on record. Dollar volume almost reached $300 million — only a year ago the $200 million milestone was surpassed. In only three years, the May 2007 dollar volume more than doubled May 2004’s total.
Overall market performance has also been impressive. The average days on market for residential-detached sales in May was less than three weeks, and three of every four listings entered on MLS® sold this year.
The REALTORS® Association of Edmonton reported that May residential sales activity went over $1 billion for the first time. The year-to-date value of property sales on its MLS® by the end of May had already eclipsed the total for all of 2005. In May, MLS® sales reached 3,223 units.
The average price of a home in Edmonton rose three per cent to $426,028 — no wonder Edmonton Eskimo football players cannot afford to live there.
Winnipeg’s average house price based on May 2007 sales was $194, 590, less than half Edmonton’s average sale price.
One clear difference between the two MLS® markets is condominium activity. Condo sales in Edmonton represented 36 per cent of residential sales while in Winnipeg it is approximately nine per cent. Because of this low figure, market forecasters believe there is potential for increased condominium projects and sales in Winnipeg.
The following was provided by the Canadian Real Estate Association:
For the second consecutive month, national MLS® residential sales activity, new listings, average prices and dollar volume all reached new heights, according to statistics released by the Canadian Real Estate Association.
Actual MLS® home sales activity in Canada rose 11 per cent year-over-year to 60,735 units in May 2007. Led by year-over-year gains in Ontario and Québec, it was the first time in history that national sales activity surpassed 60,000 transactions in one month.
Activity rose in every province compared to May 2006, and reached the highest level for any month on record in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick and Nova Scotia.
Seasonally-adjusted sales also surpassed all previous monthly levels in May, climbing 2.5 per cent above the previous record set in April. The monthly increase was the result of higher activity in British Columbia, Ontario and Québec.
Year-to-date transactions also set a new record. In the first five months of this year, home sales via the Multiple Listing Service® numbered 233,156 units — a 7.8 per cent increase over the same period last year. New year-to-date records were posted in all provinces except British Columbia.
The national MLS® residential average price rose 10.8 per cent year-over-year in May to $314,258 — a new record. This was the strongest year-over-year average price growth since August 2006. Average price set new records in all provinces west of Nova Scotia.
New MLS® listings reached 92,130 units in May 2007. This was 7.5 per cent above the previous record set in May 2006, and the first time in which new listings exceeded 90,000 units in a single month.
The year-over-year increase in new listings was
fueled by a large rise in Alberta, and by comparatively modest gains in British Columbia, Saskatchewan, Québec and New Brunswick. New listings also set records in British Columbia, Alberta and New Brunswick, and reached the second highest level on record in Ontario and Newfoundland and Labrador.
Seasonally-adjusted new MLS® listings also shattered all previous monthly records in May, climbing 1.1 per cent above the previous record set in April. The monthly increase in new listings was bigger than the increase for sales activity, which caused the resale housing market to tighten slightly in May.
The MLS® housing market remains tightest in Saskatchewan and Manitoba.
The resale housing market has become considerably more balanced in Alberta than it was at the beginning of the year. By contrast, the resale housing market has tightened in Ontario and Québec in recent months, and has become significantly tighter in Manitoba.
Actual MLS® residential dollar volume rose by 23 per cent year-over-year to $19.1 billion in May. This was the first month in which the value of MLS® residential sales surpassed $19 billion. MLS® dollar volume set new records in every province except Prince Edward Island and Newfoundland and Labrador.
“May 2007 was a very strong month for resale housing activity in Canada, and the national MLS® residential market shattered all previous records for a second consecutive month,” said CREA president Ann Bosley. “Resale housing is one of the major engines driving the national economy, and activity remains on track to a new national record in 2007.
“The recent increase in mortgage interest rates may encourage prospective home buyers to jump off the fence and into the market,” Bosley added. “I also expect that many prospective buyers across the country who have pre-approved mortgages will take advantage of these lower interest rates and purchase a home in June.”
“Higher interest rates and further price increases will cause sales activity to ease gradually over the second half of the year in response to an erosion in affordability,“ said CREA chief economist Gregory Klump.