The housing market's surprising strength was on full display in the August data released Monday, with sales up 11.1 per cent from a year earlier and prices rising more than economists expected.
"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," Bank of Montreal chief economist Doug Porter wrote in a research note. "Contrary to the Greek chorus of woe, sales are now above their 10-year average in seasonally adjusted terms."
Prices, too, are defying expectations. "The housing market has proven more resilient in 2013 than we had anticipated," Toronto-Dominion Bank economist Diana Petramala wrote in a note Monday. "The outperformance has been particularly notable on the price side."
August's results prompted the Canadian Real Estate Association to increase its forecasts for both the number of houses that will change hands this year and for prices. It noted that some of the market's current strength likely stems from buyers with pre-approved mortgages pressing forward before rates rise further.
CREA is now forecasting 449,900 sales over the Multiple Listing Service this year, up from the 443,400 figure set in June. Before that, CREA had cuts its forecast three times in the face of the protracted sales slump that ensued from the summer of 2012 to this spring, after Ottawa tightened mortgage insurance rules.
"National sales have improved more quickly than anticipated," said the association, which represents the country's realtors. "This likely reflects the transient influence of buyers with pre-approved financing making purchases before their lower pre-approved rates expire, particularly in some of Canada's most active and expensive housing markets."
August's sales were 2.8-per-cent higher than July's, according to the association.
Despite the increases, the latest forecast for national home sales this year remains 1 per cent lower than last year. So far home sales in 2013 are about 2.9-per-cent lower than during the first eight months of 2012. Only British Columbia and Alberta are expected to see higher sales levels this year.
The strength of pricier markets such as Vancouver is pulling average prices higher than expected, the association added. It expects the national average home price will rise 3.6 per cent this year to $376,300.
The national average sale price in August came in 8.1-per-cent higher than a year ago, at $378,369. But the association said that if greater Toronto and Greater Vancouver are taken out of the picture, national average prices were up by only 4.8 per cent. The MLS Home Price Index, which tries to present a more apples-to-apples picture that takes into account changes in the types of homes that are selling, was up 2.9 per cent.
In a research note released just prior to the data, Bank of Montreal economist Benjamin Reitzes noted that the year-over-year numbers appear stronger because the market was plunging at this time last year, but said recent sales levels are nevertheless healthy by historical standards.
"However, the improvement in activity over the past few months probably won't be sustained, as mortgage rates have jumped nearly one percentage point which will weigh on activity later this year," he added.