Canadian home sales rose 2.8 percent in August from the previous month, extending the strongest string of monthly gains since 2011.
Sales have increased for sixth consecutive months at an average pace of 2.3 percent, the most since January 2011, Canadian Real Estate Association data show. From a year earlier, sales rose 11.1 percent in August, the Ottawa-based group said in a statement today on its website.
Recent data show Canada’s housing market is defying warnings from economists and policy makers about a collapse, easing concern that falling real estate prices will act as a drag on the nation’s growth. The market’s rally suggests the effect of tighter mortgage rules implemented last year are petering out.
“Next to no one predicted a big mid-year bounce in home sales at the start of 2013, when calls for Canadian housing market calamity were all the rage,” Doug Porter, chief economist at BMO Capital Markets, said in a note to investors today. Buyers entering the market before mortgage rates rose may have “juiced” sales in recent months, Porter said.
Lenders such as Royal Bank of Canada and Toronto-Dominion, the nation’s two largest, have raised mortgage rates in recent weeks to reflect higher yields in the bond market.
“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,” Gregory Klump, the realtor group’s chief economist, said in the statement.
The six-month stretch of gains follows a contraction at the end of last year after Finance Minister Jim Flaherty tightened rules on government-insured mortgages, on concern that a condo glut might lead to sharp price declines. The Office of the Superintendent of Financial Institutions, the nation’s federal banking regulator, released tougher mortgage-lending standards last year.
Average sales prices rose 0.6 percent to C$387,147 ($375,415) in August from July, an 8.1 percent increase from a year earlier, CREA said today. The group forecast total home sales of 449,899 units in 2013, which represents a 1 percent decrease from last year. Realtors have sold 325,180 homes this year, down 2.9 percent from the same period last year.