The Canadian housing market has defied the naysayers yet again — sales rose 3.6 from April to May, average prices went up 3.7 per cent and the market appears poised to return to the 10-year sales norm by 2014, according to a revised forecast Monday from the Canadian Real Estate Association.
BMO chief economist Douglas Porter termed the 3.6 per cent sales increase, the third month in a row that transactions have edged up across the country, “snappy.” The fact that house prices are up in 24 of 26 major markets tracked by CREA is “making a mockery of talk of an imminent collapse,” he added.
“Until recently, it seemed that the only debate on Canada’s housing market was whether the landing was going to be of the soft or rough variety. Well, it appears that housing may not be so keen on landing at all at this point,” said Porter in a statement Monday.
In fact, almost all the economic indicators have left housing watchers — not to mention home owners and potential buyers — both confused and deeply divided about where the market is heading.
It’s been an unusual and unpredictable spring market. Transactions are off 2.6 per cent year over year, but the average price of a Canadian home was $388,910 in May, up from $375,062 a year earlier.
The month-over-month increase in home sales was the biggest gain seen in more than two years, according to CREA.
“The increase lifted national activity almost to where it had been just before new mortgage rules came into force last summer, marking the first noteworthy increase in the past nine months,” the national real estate association said.
In Toronto, prices hit a record $542,174 in May, up 5.4 per cent from May of 2012.
CREA expects sales activity to reach 443,400 units by the end of this year, down just 2.5 per cent from the 454,573 home sales recorded in 2012, rather than down 2.9 per cent, which the national real estate association had predicted earlier this year.
Alberta and Prince Edward Island are the only two provinces where sales are expected to actually increase year-over-year in 2013, according to CREA.
The association also revised its sales forecast for 2014 and now anticipates some 464,300 houses and condos will change hands, a 4.7 per cent jump in sales that’s more in line with 10-year sales norms.
Scotiabank Economics warned in a note Monday morning that what’s more worrisome now isn’t the resale transaction numbers, but “that the correction has now migrated into the new home sales market.”
It points out that new home sales were down 38 per cent in April year over year. Some 43 per cent of that decline was in single-family low-rise homes, and 33 per cent was in new high-rise homes, where developers have been putting the brakes on new condo projects.
“This matters much more than the resale correction that began over a year ago because of the value added in construction of new home sales as opposed to resales, that are mostly just paper swaps with a few added services to facilitate the transaction,” says the note from Scotiabank.