November 15, 2010 / 2:40 PM / in 7 years

Canada home resales rise, balanced conditions seen

TORONTO (Reuters) - Canadian home resales were firmer for a third straight month in October, suggesting a soft landing for the once red-hot sector and stable market conditions for the next two years, industry reports said on Monday.

The Canadian Real Estate Association said 35,714 homes changed hands in October, up 4.6 percent from September, as sales rose in three-quarters of the markets tracked by the association. However, sales were down 21.6 percent from a year earlier.

“If you’ve ever wondered what a soft landing in housing looks like, this may well be it. The string of three consecutive gains in monthly sales helps confirm a stabilization of market activity,” said Pascal Gauthier, senior economist at Toronto-Dominion Bank.

“The last three months of data suggest that a trough in resale housing activity may have formed earlier than we expected. Heading into 2011, sales and prices appear better supported than we last forecast in September.”

Gauthier said that, even if sales held steady at October levels for the rest of the year, it would still mark a near 10 percent improvement from the third quarter.

CREA said sales activity in October stood half way between the recessionary low reached in December 2008, and the record level activity posted in December 2009, offering further evidence that the market is returning to normal.

The number of new listings rose 1.3 percent in October from September.

“National sales activity and new listings have swung widely but synchronously, which has kept the market in balanced territory since the spring,” CREA said.

The industry group said the national average price in October rose 0.7 percent from a year earlier to C$343,747 ($340,344).

Separately, Canada Mortgage and Housing Corp (CMHC) said it expects housing starts to continue to moderate in the last quarter of 2010, and decline in 2011.

Housing starts are expected to total 186,200 units this year, then slip to around 174,800 units in 2011, the federal housing agency said.

CMHC also noted that the market conditions for sales of existing homes will remain balanced over the next two years as sales ease and inventory levels remain elevated.

It expects existing home sales of 440,300 units this year, dropping to about 438,400 in 2011. With an improved balance between demand and supply, the average price is expected to edge up in 2011.

The forecast compares to CREA’s forecast, which earlier this month said it sees sales of 442,200 units in 2010, and then falling 9 percent to 402,500 units next year.

CMHC also said rising employment levels and low mortgage rates will continue to support demand for new homes in 2011, but new home construction will be at a slower pace.

It sees housing starts of 186,200 units in 2010, slipping to 174,800 next year.

($1=$1.01 Canadian)

Reporting by Ka Yan Ng; editing by Rob Wilson

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