With winter housing sales up, fears of meltdown in spring demand

Financial Post:
Melting snow across Canada may have helped heat up the housing market but the new worry is whether there will be any demand left for homes this spring.
Home sales across the country rose 1.4% from January to February on a seasonally adjusted basis while actual sales climbed 8.6% from a year ago, the Canadian Real Estate Association says. In the first two months of the year, 61,772 homes changed hands, a 6.7% increase from a year earlier.
CREA said in particular there has been a jump in demand for low-rise homes, which has put pressure on prices.
“There has been a preference in recent months, in Toronto and other markets, for single-family homes which are typically more expensive. This trend held in February, putting upward pressure on the national average sale price,” the real estate group said.
That demand has helped to keep home values from falling, with the average sale price of a home in February $372,763, a 2% increase from a year earlier.
The strength of the winter market has Don Lawby, chief of Century 21 Canada Ltd., wondering whether we have stolen some of the traditional spring market frenzy.
“Many parts of Canada had no winter. The question is has the market we have been experiencing taken business from the spring market,” Mr. Lawby said as he toured Montreal. “I can look at property and I don’t have to wait for the snow to melt to see what that property looks like. I’ve seen it.”
It doesn’t hurt that interest rates remain at record lows, with the major banks engaging in another round of cuts that have taken the five-year fixed-rate mortgage down to 2.99%, the lowest rate in history, which was already breached once before this year in January.
Ottawa-based CREA, which represents about 100 boards across the country, said about half of local markets recorded an increase in activity, led by major markets in Calgary, Toronto and Montreal.
Consumers have jumped on the change in market conditions with new listings climbing. CREA said that on a seasonally adjusted basis, ne listings were up 1.9% in February from a month ago.
Gerald Soloway, chief executive of Home Capital Group Inc., said the weather was already boosting the housing numbers.
“Canadians historically don’t like to buy houses in three feet of snow. This year with a little less snow, some of the numbers are up,” he said. “That’s been my experience. People get out and look. They might buy a month later, but they get out now and get around looking at new houses and subdivisions because their car doesn’t get stuck. In southern Ontario and the urban areas, there has been very little snow.”
For its part, CREA said the latest numbers are proof the market is on solid footing. “The national rise in both sales activity and the number of newly listed homes beyond the normal seasonal increase provides clear evidence that Canadians are confident in housing market prospects,” said Gary Morse, president of CREA.
Benjamin Tal, deputy chief economist at CIBC World Markets, says you can seasonally adjust statistics but you can’t necessarily take into account the extreme conditions we’ve had this year.
“It’s only adjusted for normal weather, it accounts for winter, but you cannot capture what has happened [this year],” Mr. Tal said. “Some of the activity we are seeing is weather-related.”
As for the idea that we have stolen some of the spring market activity, Mr. Tal contends there is truth to the theory. “I would say yes, absolutely. It’s an early spring, it started already,” he says.
So what will be left over when the spring begins for real? “I don’t think it will be strongest spring ever. I think we will see some [buyer] fatigue,” Mr. Tal said.