Sales of existing homes in Canada remained slightly below last year’s level in June, but rose from the prior month for the fourth time in a row, the Canadian Real Estate Association said Monday.
The number of homes that sold over the Multiple Listing Service last month was 0.6-per-cent lower than a year earlier. But, on a seasonally-adjusted basis, it was 3.3-per-cent higher than May, according to the association, which represents the country’s realtors and tracks the data derived from their sales.
While the month-over-month figures show that the market has been gaining momentum this spring, the association is cautioning that rising mortgage rates could reverse that trend.
“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,” the association’s chief economist Gregory Klump stated in a press release. “We have seen this happen before. 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.”
Finance Minister Jim Flaherty tightened the country’s mortgage insurance rules last July in a bid to take some steam out of rising consumer debt levels and house prices. Those changes included cutting the maximum length of an insured mortgage to 25 years from 30, and saying that the government would no longer back mortgage insurance on houses over $1-million. Industry bodies representing realtors and mortgage brokers blamed those changes for the steep slump in house sales that stretched through the second half of last year into the beginning of this year, and is just now abating.
With Canada’s housing market, and the degree to which it might be overvalued, being a hot topic among commentators abroad, there is some concern in Canadian real estate circles that Mr. Flaherty might take more steps to cool the market if it shows too much momentum this year.
There are large discrepancies between how various markets across the country are faring. Roughly half of the markets that CREA tracks had higher sales than a year ago in June, with the other half showing declines.
The trend in prices is also mixed. The average price of homes that sold in June was $386,585, up 4.8 per cent from a year earlier. The association attributed much of that gain to recovering sales in some of the country’s more expensive markets, especially the Vancouver area.
The association’s MLS Home Price Index, which seeks to account for any change in the type of homes that are selling to create a more apples-to-apples comparison, rose 2.3 per cent from last June. Two-storey detached single-family homes drove the increases.
So far this year 240,068 homes have been sold over the MLS, 6.9 per cent lower than in the first six months of last year, the association said.