The Canadian Real Estate Association will release August’s home sales figures on Monday morning, and they will point at a market that is rebounding – for now.
Local real estate boards across the country have already released their data for the month. Toronto saw a 21-per-cent jump in the number of homes that sold over the Multiple Listing Service compared to a year earlier; Vancouver surged ahead 52.5 per cent; Calgary was up 27.5 per cent; Victoria 20.7 per cent; and Edmonton 9.9 per cent.
“With results from most major cities now in hand, it looks like August home sales were up about 13 per cent year-over-year nationally, with average prices rising somewhere in the seven per cent year-over-year range – though big sales gains in pricey Vancouver are again biasing up average price growth,” Bank of Montreal economist Robert Kavcic wrote in a research note.
The market is bouncing back from the slump that began in July 2012, after federal Finance Minister Jim Flaherty tightened the country’s mortgage insurance rules. His changes included cutting the maximum length of an insured mortgage to 25 years from 30.
“Home prices have awakened from the policy-induced slumber,” Toronto-Dominion Bank economist Sonya Gulati said in a research note on Friday, after the Teranet House Price Index (which looks at 11 Canadian cities) showed an increase in August for the sixth month in a row. Meanwhile, data from the National Household Survey last week showed that the proportion of homeowners who are financially stretched has risen notably since 2006.
“With the housing market showing some renewed life and Canadian household debt burdens still increasing, the domestic risks to the Canadian economy have not exited the building,” Ms. Gulati wrote. The country’s banking regulator, the Office of the Superintendent of Financial Institutions, is still considering changes to the mortgage lending rules that banks must follow.
But economists are not certain that the housing market’s rebound will last.
“Is the rebound for real? The jury is out,” Bank of Nova Scotia economist Derek Holt wrote in a research note. Industry players say that fears about rising mortgage rates spurred some potential buyers to pull the trigger this summer.
If that’s the case, “the recent pick up could be a head fake with a sales correction set to resume toward year-end and into next year,” Mr. Holt wrote.
Either way, Ms. Gulati says that “as mortgage rates creep up over the next few years, the housing market should soften once again.”