Home sales rise, reverse downtrend

Canada home sales edged up for the first time in five months reversing the downward trend in the housing market, according to data released by the Canadian Real Estate Association (CREA).

The association says seasonally adjusted national home sales activity via the Multiple Listing Service in August rose 4.1% from the previous month.

The recovery was lea by Ontario and British Columbia, with monthly gains in these two provinces accounting for most of the improvement in national sales activity in August.

“The hangover from accelerated home purchases is likely to persist over the rest of the year,” says Gregory Klump, CREA’s chief economist. “Although economic and job growth are expected to be tepid, they will continue to support housing markets.”

Seasonally adjusted sales activity either increased or remained stable in over half of all local markets across Canada. The number of new residential listings on MLS also gained 1.9% in August compared to the previous month, although they remain 16% below the peak reached last April on a national basis.

The average price of homes sold via MLS in August was $324,928, on par with the same month last year ($324,843). The prices dropped slightly in Alberta and New Brunswick for the same period, but gains in other provinces buoyed the national average.

Although average prices rose or was stable in nearly two-thirds of all local markets on a year-over-year basis, gains are declining in Canada’s busiest and priciest markets.

“Rising interest rates and a projected slowdown in job growth mean that the Canadian housing market is expected to continue to cool,” says Pahud. “This is overlooked in recent commentary that suggests further changes to mortgage regulations may be needed.”

A further tightening of regulations could negatively impact Canada’s softening housing market and consumer confidence.

“High sales activity late last year and earlier this year borrowed from sales this summer and will continue do so over the coming months,” said Klump. “This makes the return to more normal levels of sales activity look like a steep downward trend.”

The number of months of inventory stood at 6.9 months at the end of August 2010 on a national basis, down slightly from the 7.3 months of inventory at the end of July 2010. The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and measures the balance between housing supply and demand.

(09/15/10)

Staff

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