Home sales up last month

Home sales were up in August by 2.8% over July, says the Canadian Real Estate Association.

The number of local markets where sales improved on a month-over-month basis ran roughly even with those where activity edged lower in August, with increases in major urban centres tipping the balance.

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Actual (not seasonally adjusted) activity came in 11.1%, ahead of levels reported in August 2012 to run roughly in line with its 10-year average. Sales were up on a year-over-year basis in about two-thirds of local markets, led by double-digit gains in Vancouver Island, Victoria, Greater Vancouver, the Fraser Valley, Calgary, Edmonton and Greater Toronto.

“Sales activity dropped sharply around this time last year in the wake of tightened mortgage rules and has improved since then, so a sizeable year-over-year increase this August was expected,” said Gregory Klump, CREA’s chief economist. “Buyers who put off purchase decisions or who were otherwise sidelined by tighter mortgage rules and lending guidelines implemented last year were anticipated to return to the housing market. That said, the upward trend and levels for activity in recent months has been steeper than expected, but that may not last.”

“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 added. “That pool of homebuyers has largely evaporated so demand may soften over the fourth quarter. The outsized year-over-year gains may persist, however, due to weak sales toward the end of last year.”

Some 325,180 homes have traded hands across the country so far this year. That stands 2.9% below levels recorded in the first eight months of 2012. Notwithstanding the recent upward trend in demand, CREA still expects the 2013 annual sales figure to come in below the 2012 figure.

The number of newly listed homes rose 1.8% on a month-over-month basis in August. Slightly more than half of all local markets recorded gains. As with sales activity, that list includes many of Canada’s most active housing markets.

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With sales activity having risen by slightly more than new listings in August, the national sales-to-new listings ratio edged up to 54.6% compared to 54.1% in July. While the national housing market has firmed slightly in recent months, it remains firmly rooted in balanced market territory where it has been since early 2010.

Based on a sales-to-new listings ratio of between 40 to 60%, a record 73% of all local markets were in balanced market territory in August.

The number of months of inventory is another important measure of balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity. There were 5.9 months of inventory at the national level at the end of August, down from 6.1 months one month earlier. As with the sales-to-new listings ratio, the current months of inventory measure marks a slightly firmer but still well balanced market.

The actual (not seasonally adjusted) national average price for homes sold in August 2013 was $378,369, an increase of 8.1% from the same month last year. Year-over-year average price gains in recent months reflect outsized sales declines last year among some of Canada’s larger and more expensive markets as a proportion of national activity. For example, Greater Vancouver’s long-term (10 year) average proportion of national activity is 7.4% on an unadjusted basis but it had fallen to 4.6% in August 2012. Since then, it has rebounded and now stands at 6.3% – its second-highest level in the past year.

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If Greater Toronto and Greater Vancouver are removed from the national average price calculation, the year-over-year increase is cut from 8.1% to 4.8%. A better gauge of what’s going on with prices is the MLS Home Price Index, which is not affected by changes in the mix of sales the way that average price is.

The Aggregate Composite MLS HPI rose 2.92% compared to August 2012, up from 2.66% in July. That said, year-over-year growth in the price index has slowed since late 2011 and has ranged between two and 3% for the past seven months.

Year-over-year price growth picked up among all property types tracked by the index. One-storey and two-storey single family homes saw year-over-year price gains of 3.45% and 3.61% respectively in August. Year-over-year price growth for townhouse/row and apartment units remains more modest, with these segments recording gains of 1.85% and 1.25% respectively in August.