July 15 (Bloomberg) -- Canadian existing home sales rose 3.3 percent in June, almost matching the previous month’s gain that was the fastest in more than two years, as the nation’s housing market defies predictions of a major correction.
Average home prices rose 0.6 percent in June and are up 4.8 percent from a year earlier, the Canadian Real Estate Association said in a statement today. June’s gain follows a 3.6 percent increase in May, the biggest since January 2011.
Recent data suggests the nation’s housing market, while moderating, remains robust. Building permits rose for a fifth month in May while housing starts fell less than economists predicted in June. Gregory Klump, chief economist at the Ottawa-based realtor group, said an increase in mortgage rates by banks may have triggered purchases.
“Increases in mortgage interest rates likely prompted some buyers with pre-approved mortgages to jump off the sidelines and into the market in June,” Klump said in the statement.
Higher borrowing costs may slow demand later this year, he said. Average mortgage rates have increased to 4.01 percent from about 3.9 percent at the beginning of June, according to the Bank of Canada weekly report on chartered bank administered interest rates.
Bank of Canada officials have said there are signs of a “constructive evolution” in household finances after a surge in home starts and re-sales fueled by rising consumer debt. Finance Minister Jim Flaherty tightened mortgage rules for a fourth time last year. Existing home sales were down 0.6 percent from a year earlier, CREA said today.
The increase in sales volume in June was led by a 6.4 percent rise in Vancouver and a 3.4 percent gain in Montreal. Toronto sales grew 0.9 percent.
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