If this keeps up, we are going to be Vancouver renters forever!

Housing prices top $300,000

ROMA LUCIW

Globe and Mail Update

The average national price of an existing home in Canada surged above $300,000 for the first time ever in May, with actual sales activity smashing through all previous records as buyers rushed to buy a house while they can still afford to do so.

The latest data shows that despite forecasts of a slowdown, Canada's sizzling housing market continues to fire on all cylinders, particularly in oil-rich Alberta.

The price of a residential home in Canada surged 12.9 per cent from a year ago to $303,836 in May, topping $300,000 for the first time, according to sales tracked through MLS by the Canadian Real Estate Association. The 12.9 per cent rise is the biggest year-over-year increase in two years.

House prices in only three Canadian cities -- Vancouver, Calgary and Toronto -- actually averaged more than $300,000, with Calgary chasing Toronto for the No. 2 spot on the most expensive list.

The cheapest place to buy in May was the Mauricie region of Trois-Rivières in central Quebec, where the average home sold for $102,870. The priciest was the Greater Vancouver area, where homes averaged $518,176.

”May marks the fourth consecutive month in which the major market average residential price broke all previous records,” CREA chief economist Gregory Klump said.

Soaring house prices have resulted in a growing shortage of lower-priced homes in the resale market, he said, which is crimping sales of lower-priced homes and driving up the national average price.

"With prices on the way up and a shortage of listings in lower price ranges, some buyers may feel that if they don't buy now, they may not be able to afford to later,” Mr. Klump said.

Alberta's resale market led the gains, with home prices in Calgary soaring 43.6 per cent to $358,214. Home prices in Edmonton jumped 23 per cent to $242,936, in Vancouver they rose 23.7 per cent to $518,176, and in Toronto they rose 5.5 per cent to $365,537.

In Regina, Quebec City, Saint John, Saskatoon, Sudbury, Thunder Bay, and Winnipeg, average house prices were under $200,000, the CRE said.

In major Canadian cities across the country, 37,460 houses were sold in May, up 4.4 per cent from a year ago. Since the start of 2006 rose 5 per cent when compared with the first five months in 2005.

On a seasonally adjusted basis, sales in major markets rose 2.4 per cent to 28,441 homes in May, the CREA said.

New listings in May hit the highest level on record, but failed to match sales, leaving the market tighter.

Mr. Klump attributed the continued strength in the housing market to a booming labour market, rising incomes and resilient consumer confidence. Those factors are boosting sales activity, despite rising interest rates and home prices.

Douglas Porter, deputy chief economist for BMO Nesbitt Burns Inc., warned last month that Canada's sizzling housing market is displaying some dangerous conditions, and that the current cycle may come to an ugly end.

"The big story here is that the housing market in the West is just on fire and its not letting up yet," he said in an interview Wednesday. "We are getting into dangerous territory, especially in Western Canada."

Until recently, the strength in the housing market was completely justified by low interest rates and a robust economy, Mr. Porter said. However in recent months, troublesome aspects such steep price acceleration and eroding affordability have emerged.

"The vast majority of people are going to get priced right out of the market," he said.

Mr. Porter still believes that the housing market will lose momentum over the next year, as economic growth slows, but he warned that "the longer it goes, the more dangerous it becomes."