February Price Gains Up, But Market is Slowing

The Canadian Real Estate Association, or CREA for short, released its MLS Home Price Index report and it showed that in February 2012, the industry did see an increase in pricing, but that the rate of increase is slowing a bit. The year over year price comparisons might be a sign that prices in the Canadian home market are leveling out.

Highlights from the report showed that February prices were 5.1 percent higher than prices in the same month in 2011. That is the smallest increase seen since June of 2011. The largest increase was in Toronto, at 7.3 percent, but the momentum is waning. Calgary saw a 2.5 percent increase and Montreal was up 1.6 percent.

The Home Price Index saw a 1.1 percent month over month increase in February of 2012. Two storey single family properties saw the largest price increase, at 1.6 percent. Apartments and townhouse units saw smaller increases, at 0.5 percent and 0.4 percent respectively.

Gary Morse, who is president of CREA, noted that trends and pricing does vary considerably in the different markets. Those wanting information in their area should contact a local realtor for specific figures. Toronto took the lead in the five markets where the MLS HPI was on the positive side of the year ago level, coming in at 7.3 percent. The city also was above last year levels in all of its housing categories, with two storey single family properties the strongest at 6.9 percent.

The fact that February 2012 saw a 1.1 percent gain over this past January is typical of the market. Real estate sales tend to go up as the weather warms. That 1.1 percent is a lower increase than seen in either 2010 or 2011, which Gregory Klump, Chief Economist of CREA sees as an indicator of a pricing slow down.

There is increased interest in the condominium market, especially in Toronto, where that sector saw a four percent increase in demand over February of 2011. Other condo markets across the country are healthy but not doing quite as well. But, pricing for condos in Toronto is also slowing down, with price gains in line with consumer price inflation. This means that the condo market is not in danger of overheating.

Several new condo projects have gone up in the Greater Toronto Area during the past 12 months. Some have gone for sale, others for lease, which makes for a healthy supply. The condo market in that city is considered balanced. At present there are not enough condos under construction to cause a possible glut in the market. Barring unforeseen circumstances, such as a marked rise in interest rates or a dip in the economy, that market is expected to remain balanced for quite some time.

During the remainder of 2012, we should see an increase in the level of interest rates offered by the banks and other mortgage providers. It will be interesting to see how this affects real estate markets throughout the country.