By Andrea Hopkins
TORONTO, Sept 16 Sales of existing homes in
Canada rose in August from July and were much higher than a year
earlier, the Canadian Real Estate Association said on Monday in
a report that showed continued strong demand in housing that may
end as mortgage rates rise.
The industry group for Canadian real estate agents said
sales activity was up a solid 2.8 percent in August from the
month before. While that may reflect rising mortgage rates
pulling demand from the future, it still defied predictions
early in the year for a sharp slowdown in Canadian housing.
"Suffice it to say that next to no one predicted a big
mid-year bounce in home sales at the start of 2013, when calls
for Canadian housing market calamity were all the rage," BMO
Capital Markets Chief Economist Doug Porter said in a research
note, adding that sales are now above their 10-year average in
seasonally adjusted terms
Actual sales for August, not seasonally adjusted, were up
11.1 percent from a year earlier. The jump is due to a move by
the government to tighten mortgage lending rules last summer,
which dramatically reduced sales in the second half of 2012 and
will make year-over-year comparisons look stark this year.
Still, CREA Chief Economist Gregory Klump said stronger than
expected sales are probably due to the fact mortgage rates have
inched higher and buyers either want to make a deal before they
rise further or before their pre-approved rate expires.
"Recent increases to fixed mortgage rates caused sales to be
pulled forward as buyers with pre-approved financing at lower
rates jumped into the market sooner than they might
have otherwise," Klump said in the report.
Klump said the pool of homebuyers with pre-approved
financing has largely evaporated, which means demand may soften
over the fourth quarter.
TD Securities' senior fixed income strategist, Andrew
"We do not expect the recent reacceleration in the housing
market to last too much longer, as mortgage rates are expected
to continue to rise through the end of 2013 and into the 2014,
reducing affordability," Kelvin said in a note.
CREA's home price index rose 2.9 percent in August from a
year earlier. Year-over-year growth in the price index has
slowed since late 2011 and has ranged between two and three
percent for the past seven months, CREA noted.
"While the sales figures have been up and down like a yo-yo
over the past year, prices just keep quietly churning ahead,"
When compared to year-ago levels, more local markets
notched gains in the CREA's MLS home price index. Calgary prices
were up 7.4 percent compared to August 2012, while Saskatoon
prices rose 3.9 percent, Toronto prices rose 3.7 percent,
Montreal prices were up 2.4 percent, and Ottawa prices were 0.8
Vancouver prices were 1.3 percent lower than a year ago,
according to the price index, while Regina prices were 1.5