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Latest read on Canadian housing sales expected to be modest, economist
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The Canadian Press
TORONTO - The latest read on the Canadian housing market is expected Monday as the Canadian Real Estate Association gets set to release its sales results for December.
BMO Capital Markets expects the December sales to be up three per cent compared with a year ago and the average price to have gained four per cent.
"Below the surface, however, the story gets a tad more interesting," economist Robert Kavcic wrote in a report.
Kavcic noted the formerly white-hot Vancouver market is now cooling with sharply lower sales and with prices coming off their highs, while Toronto continued to push higher in December.
"Looking ahead to 2012, cooler housing activity should prevail as elevated household debt levels, shaky confidence and a weakened job market counter extremely low mortgage rates."
Some of Canada's biggest banks are advertising promotional ultra-low mortgage rates as the battle for customers intensifies amid a drop-off in consumer borrowing.
The Bank of Montreal (TSX:BMO.TO - News) began the marketing race with a special discount five-year fixed rate at 2.99 per cent for a limited time.
TD Bank (TSX:TD.TO - News) responded with a four-year special fixed rate at 2.99 per cent available until the end of February, while Royal Bank (TSX:RY.TO - News) later matched that with its own four-year 2.99 per cent rate offer, along with a seven-year special fixed rate of 3.99 per cent.
Royal LePage Real Estate Services has predicted the price of homes in Canada will continue rising this year, but the hottest markets in Toronto and Vancouver will grow much more slowly than in 2011.
The country's largest real estate broker said low mortgage rates will continue underpinning housing demand despite the weakening economy.
CREA compiles its results from sales through its Multiple Listings Service.
The association reported home sales and prices were up in November, but the number of listings dropped off, pushing the sector closer to a sellers' market that could boost competition for a sparse selection of homes.
Home resales rose six per cent in November on a year-over-year basis and jumped 0.5 per cent on a seasonally adjusted basis compared with October, while the national average price increased 4.6 per cent year over year to $360,396.
The International Monetary Fund has suggested that Canadian homes on average are 10 per cent overpriced and warned it may be a factor that puts the country's economic recovery at risk.
The Bank of Canada has also repeatedly cautioned prospective buyers to guard against being lured by low mortgage costs because interest rates and therefore monthly payments, will eventually increase as the economy gets stronger.
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