Headlines boasting "Canadian home sales increased by 73%" were in almost every newspaper across the country today as the Canadian Real Estate Association released the national housing sales numbers for November today. That is a huge increase, but you also have to keep in mind that last November was one of the worst months for home sales we've seen in a very long time.
The question is, are Canadian home buyers overly confident? Sales are surging because of high affordability and low interest rates, but what happens when the rates inevitably rise?
According to an article in the Globe & Mail economists are encouraged by the increase in new listings, which they hope will slow the increase in average prices we've seen nationally for the past few months. In other words, they hope the housing market continues to improve, but more slowly.
The article gives a great example of what a small increase in mortgage rates will due to monthly payments – a five-year variable rate mortgage at 2.25 per cent on $300,000 would carry a monthly payment of about $1,300, assuming a 25-year amortization period. A move to 5 per cent would boost the payment to $1,750.
While residential home sales in Edmonton have increased dramatically year over year, (1261 this year compared to 891 in November '08) our average sale price is about equal to that of last year. Slow and steady wins the race not volatility, and I for one am pleased to report that Edmonton is a bit behind the national average this time! We already set one record this week (for the lowest temperature) lets keep it to that, unless the Oilers can set a new record for wins in December!
