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Low Interest Rates Continue to Draw Home Buyers

Blog by Rod & Rhea Hayes | January 16th, 2012

Sales of existing homes in Canada rose 1.8 per cent in December from the previous month, and by 4.6 per cent from a year earlier, the Canadian Real Estate Association said Monday.

 Sales totalled 39,740 unit last month, compared to 39.033 in December and 23,669 units a year earlier, the industry group said.

 For all of 2011, sales were up by a seasonally adjusted 2.2 per cent to 456,749 units.

 Meanwhile, the number of newly listed homes rose three per cent in December from a month earlier, CREA added.

"The momentum in sales activity provides clear evidence that low interest rates continue to draw homebuyers to the housing market," said CREA president Gary Morse.

"While buyers have become increasingly cautious, the hand off for sales activity going into the new year suggests that Canada's housing market will continue to benefit from low interest rates in 2012, and continue making a significant contribution to Canadian economic activity."

The average sale price was $358,480 on a seasonally adjusted basis in December, down 0.9 per cent from November but up 0.9 per cent on an unadjusted basis from in December 2010.

"Debt-heavy households are expected to curb their appetite for mortgages, pointing to some further moderation in housing in 2012," said Douglas Porter, deputy chief economist at BMO Capital Markets. "We look for both sales and prices to be roughly flat this year. That could be just what the policy doctor ordered, allowing incomes to catch up to higher prices.

Still, real estate brokerage firm Royal LePage said last week that with record low long-term mortgage rates in place, Canada's housing market will continue to be strong this year.

It forecast prices across to country to rise 2.8 per cent by the end of 2012, after stronger gains last year.

CREA chief economist Gregory Klump said Monday "momentum for national sales activity and average price remains positive but is slowing, which suggests that the continuation of low interest rates is not causing the Canadian housing market to overheat."

"High end home sales seem unlikely to spike again in the first quarter like they did at the beginning of 2011, so national average price momentum may wane further over the next few months. With interest rates widely expected to remain low throughout 2012, home ownership will remain affordable, and continue to support home sales activity."

Read more: http://www.canada.com/business/Home+sales+cent+December/6003055/story.html#ixzz1jeTzOu4c