Housing sales still healthy says bank economist

‘The June report leaves the second-quarter tally at an impressive 6.4% above the previous quarter – the strongest performance since 2010’

By Peter Scot –

According to Bank of Montreal Senior Economist Robert Kavcic, the latest data from the Canadian Real Estate Association show that the Canadian housing market remains balanced and well-behaved. Existing home sales rose for the fourth month in a row in June, posting a 3.3 per cent seasonally adjusted gain from the prior month and down just 0.6 per cent from the readings of a year ago.

“These figures represent another body blow to the Canadian housing bears,” said Mr. Kavcic. “The June report leaves the second-quarter tally at an impressive 6.4 per cent above the previous quarter – the strongest performance since 2010. In fact, sales are now back to levels seen before the latest round of mortgage rule tightening took effect in early July, helped by very low mortgage rates through much of the spring.”

Mr. Kavcic noted that the recent rise in 5-year fixed rates – now in the neighbourhood of 3.5 per cent versus sub-3 per cent just over a month ago – might have actually stoked sales activity in June, with buyers making their move before their lower rate contracts expired. “That could set the stage for another cooling off period this summer. At any rate, measures of market balance are clearly tightening, with the sales-to-new listings ratio again slightly above historical norms and the months’ supply down for the third time in the past 4 months.”

Regionally, most markets have tightened up in recent months, including an impressive turnabout in Vancouver – sales are now 52 per cent of new listings, up from a low of 36.6 per cent late last year. Toronto is firmly balanced, while Calgary is again seeing a sellers’ market.

Mr. Kavcic also said that firmer sales and lower inventories have all but erased any threat of an imminent melt in prices. “Average prices were 4.8 per cent above year-ago levels in June, with fully 80 per cent of the major markets surveyed reporting prices up from last year. Vancouver and Regina are both still seeing prices below year-ago levels by this measure, though Vancouver has bottomed in recent months. Calgary is the clear outperformer, up a strong 6.7 per cent year over year, and now less than 3 per cent from peak 2007 levels.”

“It’s essential that home buyers stress-test their mortgage against a higher interest rate to ensure they could handle any potential increases in interest rates down the road,” said Laura Parsons, Mortgage Expert, BMO Bank of Montreal. “It’s also wise to choose a mortgage with a shorter amortization, which can help homeowners become mortgage-free sooner.”

Parsons added that those who are ready to enter the marketplace can get a head start on planning by getting pre-approved for a mortgage before setting out to lock down the perfect home