Canadian home sales rise

National home sales rose in June 2013, building on gains recorded over the previous three months, says the Canadian Real Estate Association.

It adds the number of home sales processed through the MLS Systems of real estate boards and associations in Canada rose 3.3% on a month-over-month basis last month.

This marks the fourth consecutive monthly increase, with activity now running 11% above where it stood in February.

Home sales improved in two-thirds of all local markets in June, including almost all large urban markets. The biggest gains were reported in Victoria, Greater Vancouver, the Fraser Valley, Edmonton, Saskatoon, Winnipeg and Montreal.

“For the second month in a row, sales improved in the majority of local markets,” says CREA president Laura Leyser.

Gregory Klump, CREA’s chief economist, says, “Increases in mortgage interest rates likely prompted some buyers with pre-approved mortgages to jump off the sidelines and into the market in June, particularly in larger, more expensive urban markets where affordability is strained.”

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He adds, “If fixed mortgage rates continue holding where they are or edge slightly higher, sales may ebb over the summer and early autumn, with slightly higher borrowing costs picking up where the finance minister left off last year to keep the housing market in check.”

Actual (not seasonally adjusted) activity came in 0.6% below levels reported in June 2012. When compared to year-ago levels, the number of local markets was split evenly between those with year-over-year declines and those that posted gains in June.

Greater Toronto and Montreal remain below 2012 levels, although their declines continue to shrink. Meanwhile, sales in Greater Vancouver, Calgary, and Edmonton were up compared to last June.

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About 240,068 homes have traded hands across the country so far this year. That stands 6.9% below levels in the first half of 2012, when mortgage rules and guidelines had not yet been tightened. While the gap between sales this year and last year is expected to diminish, annual sales are still expected to fall short of last year’s total.

The number of newly listed homes edged down 0.5% on a month-over-month basis in June. New listings rose in a number of Canada’s most active markets, including Greater Vancouver, Edmonton, Saskatoon, Winnipeg, Hamilton-Burlington, Oakville-Milton, and Quebec City.

This was offset by a decline in new listings in a number of other large urban centers, such as the Fraser Valley, Calgary, Greater Toronto, London & St. Thomas, Montreal and Fredericton.

With sales activity up and new listings down, the national sales-to-new listings ratio rose to 53.8% in June, up from 51.8% in May.

However, stats remains firmly rooted in balanced market territory, as has been the case since early 2010. Based on a sales-to-new listings ratio of between 40% and 60%, two-thirds of all local markets were in balanced market territory in June.

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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.

The number of months of inventory also indicates Canada’s housing market remains balanced. There were 6.1 months of inventory at the end of June 2013, down slightly from 6.3 months at the end of May.

The actual (not seasonally adjusted) national average price for homes sold in June 2013 was $386,585, an increase of 4.8% from the same month last year.

“Declines in the national average price at this time last year reflected a drop in sales activity in some of Canada’s most expensive housing markets,” says Klump. “Much of the increase in the national average price in May and June can be attributed to recovering demand in those same markets, particularly Greater Vancouver.”

He adds, “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 the average price is. The index shows year-over-year price growth stabilizing at a rate barely ahead of inflation.”

The Aggregate Composite MLS HPI rose 2.3% compared to June 2012. Year-over-year growth in the MLS HPI had been slowing since late 2011, but has held steady near its current rate for four months.

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