Canadian Home Sales Beat Expectations, Surge In June

Canada’s housing market continued to flex its muscles in June, with the number of existing homes that changed hands coming in 11.2 per cent higher than a year earlier.

Vancouver, Calgary, Toronto and Hamilton were among the markets that showed the most strength.

On a seasonally-adjusted basis, sales rose 0.8 per cent from May, which had also been a strong month, according according to the Canadian Real Estate Association, which represents the nation’s realtors and tracks sales by way of the Multiple Listing Service. Sales have now risen for five months in a row, to their highest level since March 2010, in the wake of a winter slump which had been caused by unusually bad weather.

Prior to the data being released, Bank of Montreal economist Robert Kavcic had been expecting sales to rise 7.5 per cent from a year earlier. And even that would have been a strong showing, one that he attributed to pent-up demand after the harsh winter as well as low mortgage rates.

It’s not only sales that are rising. The average sale price of a home in the country was up 6.9 per cent from a year earlier, to $413,215. Averages can be distorted, for example by a higher number of sales in a pricier city. Factoring the Toronto and Vancouver areas out of the equation, the average price rose 5.2 per cent to $336,164, CREA said.

The MLS Home Price Index, which seeks to create a more apples-to-apples comparison of home prices than the average, was up 5.4 per cent, a faster pace than in recent months. But even then, “strong price growth is hardly a nationwide phenomenon,” Mr. Kavcic wrote in a research note. “In fact, outside of Calgary (hot economy and surging demand) and the detached side of the Toronto market (very tight supply), price growth looks much more tame.”

He added that he doesn’t think the market should be overly concerning to policy-makers at the moment.

Earlier this week, Fitch Ratings reiterated its opinion that Canadian home prices are about 20 per cent overvalued in real terms. “We believe high household debt relative to disposable income has made the market more susceptible to market stresses like unemployment or interest rate increases,” the rating agency said.

Source: Tara Perkins @ The Globe & Mail

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