CREA‘s April 2010 housing market report indicates that Canada’s overheated housing market has started to show signs its cooling down.
Residential housing sales via MLS was over 52K across the country in April 2010 which was up 20% over last April 2009. Seasonally adjusted home sales was down 2.6% from March 2010. With talk of the housing market cooling over the next few months and continuing into 2011 due to higher mortgage rates and the introduction of the HST on July 1, 2010 many homeowners entered the market as sellers trying to see if they get out before buyers dry up. This resulted in 99,901 homes listed for sale in April 2010, with the total supply of residential homes listed on the MLS of 236,397.
House prices are still rising however, as the average house price sold on MLS rose 12.2% in April 2010 over last April and was driven by increases in the major markets of Alberta, Ontario and Quebec.
The Canadian Real Estate Association (CREA) has offered to change its rules to allow agents to post listings on the MLS, through which 90% of Canadian house sales are done, for a flat fee charged to the house sellers. Previously if a seller wanted to list their house for sale on the MLS system they had to use an agent and pay anywhere from 3-6% of the sale value as a commission for the privilege. When you include these costs with securing a home mortgage, appraisals, legal fees, moving costs etc, buying a new house can be a daunting prospect.
Despite this move by CREA, the Competition Bureau has said the changes are still not enough to open up CREA’s grip on the MLS and still prevents innovative players from entering the market as a simple future vote by members could reverse these changes again. Competition Commissioner Melanie Aitken, said “There is nothing in these proposals that we haven’t seen before and they do not solve the problem. They are a step in the wrong direction. These amendments amount to a blank cheque allowing CREA and its members to create rules that could have even greater anti-competitive consequences.”
In addition, agents are now required to pass along a home phone number, if the seller chooses, directly to an interested buyer, so that they can negotiate directly.
The changes should be made soon at each of the local 101 real estate boards, but they must individually approve these changes themselves.
The Competition Bureau believes that the current system keeps prices artificially high, so hopefully future changes will bring down the price of selling your home. If you take a house value of $300,000, a 5% commission charge on that sale, amounts to $15,000 that the seller needs to pay. With the upcoming introduction of the new HST in the summer, any savings in the housing industry would be welcome.
There has been a lot of news lately about opening up the Canadian Real Estate market and allowing easier access to list properties on MLS, in addition to accessing more of the detailed information on MLS. Historically, this data has only been available to licensed, registered real estate agents, but today, their stranglehold on this information may have loosened.
The Competition Bureau announced today that it will challenge rules imposed by the Canadian Real Estate Association (CREA) that “limit consumer choice and prevent innovation in the market for residential real estate services”. The Commissioner of Competition has determined that CREA’s rules restrict the ability of consumers to choose the real estate services they want, forcing them to pay for services they do not need. The rules also prevent real estate agents from offering more innovative service and pricing options to consumers, such as agents simply charging a fee for listing a property on MLS, and the consumer can purchase additional services only if they want to. The Commissioner’s application to the Competition Tribunal seeks to strike down these anti-competitive rules.
Melanie Aitken, Commissioner of Competition said, “Consumers should be able to choose which services they want to buy in order to facilitate that transaction, including lower-cost options. While the Bureau would have preferred to resolve this matter amicably, CREA’s leadership was unwilling to agree to changes that would have opened up competition, and offered options for consumers and real estate agents.”
For example, under CREA’s rules, agents are prohibited from offering consumers the option of simply paying a fee for an agent to list a home on the MLS system. Instead, all consumers looking to list a property on MLS must purchase a pre-determined set of additional services from a real estate agent, such as the presentation of offers and negotiation of a final deal.
These rules have given room for the For Sale by Owner or private sales to grow. These companies mainly offer their services over the internet and charge a seller to list their property for a much reduced cost and they don’t have to pay a commission once they sell their property. The major issue is getting enough eyeballs or buyers to these websites, to generate enough interest for people to sell their homes. That’s the main draw of the MLS system, its popularity, as so many people use it to look for homes for sale, although after today’s announcement it will be interesting to see if that’s still the case in 5 years time.
The Canadian Real Estate Association (CREA) reported that existing home sales had its best month ever in December 2009, housing bubble, what housing bubble!? The second half of 2009 push annual sales above 2008 levels as MLS sales showed 27,744 units sales in December 2009, which was a 72% increase year on year, although December 2008 hit its lowest monthly level in a decade. December 2009 had a new record level of sales for Ontario, Quebec, Saskatchewan, New Brunswick, and Newfoundland & Labrador.
CREA’s President said “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 homebuyers motivated to beat the introduction of the HST.”
A few interesting stats from the report:
465,251 homes were sold in 2009 which was down 10.7% from the 2007 high
Dec 2009 average house price:$337,410 (+19% year/year)
Average house prices set new annual recoord in most major cities and all provinces except Alberta
2009 residential average price in Canada’s major markets: $348,840 (+5.5% year/year)
These price increases and contiuing strong demand are bringing more sellers to the market as new listings on the MLS across the country increased to 33,090 in December 2009 which was the highest on record (+4.8% over Dec 2008).
“CREA’s latest statistics will no doubt spark further bubble talk amongst the usual suspects,” said . “Cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer.”
“By the second half of 2010, price gains are likely to shrink significantly, since a year will have elapsed since the decline and rebound.”
“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.
The Canadian Real Estate Association (CREA) has released Q1 2008 stats. The results thus far seem to indicate that the housing market in Canada is definitely starting to slowdown, however, it is performing much better than in many other countries.
Canadian House Prices:
residential MLS® average price set new records for the first half of 2008
MLS® residential average price rose 3.2 per cent year-over-year to $340,390
On a quarterly basis, the average price in Canada’s major markets was $343,235 in the second quarter, up 1.4 per cent from the second quarter of 2007.
in June the major market MLS® residential average price edged down 0.4 per cent year over year to $341,096
Canadian Housing Sales
sales activity in the first half of 2008 was down compared to the same period of 2007, which was a record-setting year
Transactions declined by 13.3 per cent year over year to 169,265 units in the first half of 2008.
Foreign Markets
It looks like the Canadian real estate market has been fairly resilient when compared to other markets around the world, as reported in the Edmonton Journal:
US home prices dropped 14% in Q1 (Case Shiller national home price index)
From Export Development Canada:
US housing starts were down 56 per cent year-over-year during May
housing starts down 56% year on year during May in the UK
-18 % during Q1 in Spain
-17% year on year in May in France
The MLS ® Major Market Residential Summary:
First Half 2008
