"Existing Home Sales Hits Record High"

"Sales increased 2 percent from November to 46,805 units on a seasonally adjusted basis, and 72 percent from December 2008, the Ottawa-based group said in a report today. The average price rose 19 percent from a year ago to C$337,410 ($328,100).

The average five-year mortgage rate was 5.49 percent last week, and in May it was 5.25 percent, the lowest since 1951 according to Bank of Canada figures. Economists including David Rosenberg of Gluskin Sheff & Associates Inc. have said the house-price gains signal a bubble may be forming in that market, a conclusion Bank of Canada Adviser David Wolf called “premature” in a speech this week.

“Many of the recent gains reflect temporary factors that could fade by summer,” Gregory Klump, the realtor group’s chief economist, wrote in the report. The year-over-year sales gains are exaggerated by a drop in activity a year ago as a weak economy shrank sales, he said.

New listings of homes for sale rose 4.7 percent in December from the previous month to 71,201 units, the report said.

Last month, Bank of Canada Governor Mark Carney said consumers and banks should be cautious about adding to household debts because a rise in record-low interest rates may leave some borrowers unable to pay. The central bank has pledged to keep its key lending rate at a record low 0.25 percent through June unless the inflation outlook shifts.

Bank of Canada policy makers have said that changing mortgage regulations are a better way than adjusting interest rates to check any housing market pressure, and Finance Minister Jim Flaherty said today that’s a possibility.

“There are some concerns now that I’ve spoken about and the governor of the Bank of Canada has also spoken about relating to insured mortgages and whether or not we are in danger of developing some sort of housing bubble, so we’re watching that carefully,” he said at a speech in Toronto."

Article Source: Bloomberg.com