--Actual Sales, NSA, up 2.1% Over August 2013 --Prices +5.3% Y/Y; Listings Down
By Courtney Tower
OTTAWA (MNI) - Canadian home resales in August surprised with a 1.8% increase over July, stronger than national real estate association economists had expected, reaching the highest monthly level for sales since January 2010.
The Canadian Real Estate Association reported Monday that existing home sales in August of 42,295 units, seasonally adjusted, were up by 1.8% from 41,541 in July, while actual sales in the month, not seasonally adjusted, were 41,148, up 2.1% from August 2013.
The August rise in home resales was the seventh consecutive monthly increase, and sales were up from year-ago levels in about half of all local markets, CREA reported. The increases were led, as usual by Greater Vancouver (2,967 sales SA, up 8.0% M/M) and Calgary (2,968 sales SA up 6.5% over July).
"Sales activity in recent months has remained stronger than was anticipated earlier this year," said CREA chief economist Gregory Klump in the association's report. He said listings and sales, deferred during the especially harsh winter season, reinforced by a decline in mortgage interest rates, rose in activity and prices later in the year.
"The boost from deferred sales in still expected to prove transitory," Klump said. Although national activity remains high, he added, sales were down in August in the majority of local markets, with sellers' markets continuing in British Columbia, Alberta and Southern Ontario.
Klump said the declining sales in more than half of local markets "may be early evidence that the transitory boost is fading."
However, he was quick to add that "low interest rates will continue to support housing affordability and sales activity."
The Bank of Canada indicates more concern than heretofore for household debt that is due largely to mortgage borrowing, having recently dropped its standing statements that household debt is "evolving constructively" and that a safe landing for the over-active market is expected.
The Bank just says now that housing activity has been stronger than expected and that housing debt has not diminished, leaving hanging the level of its concern in any possible action terms. There is market expectation that it will not raise the benchmark 1.0% policy rate to curb housing spending until sometime in 2015.
The continuing strength in existing home sales follows the report by Canada Mortgage and Housing Corporation last week of a slight dip in housing starts nationally in August, with overall starts of 192,368 units SA. The August six-month trend was static, at 189,837 starts for that month compared with August 2013.
CREA said that year-to-date activity in sales is up 4.3% compared with the first eight months of last year "and remains in line with the 10-year average for the period."
The number of newly-listed homes dropped by 1.2% in August from July. "Led by Greater Toronto, new supply was down in about 60 percent of local markets," CREA said.
The national sales-to-new-listings ratio was 55.5% in August, versus 53.9% in July. The number of months of inventory, another measure of the balance between housing supply and demand, was 5.8 months, down from 6.0 months in May, June, and July, CREA said.
Many of Canada's key market centers, in their August tallies, continue to indicate mainly strong sales but often at a slower pace in the month. For instance, the Greater Vancouver Real Estate Board reports that the 2,771 sales in August represented a decline of 9.5% from the 3,061 sales in July. Yet the August sales were up 10.2% on August a year ago and 4.3% above the August 10-year average of 2,658.
New listings for detached, attached, and apartment properties of 3,940 were down 7.9% from August last year and down 5.4% on the month. The composite benchmark price index for Metro Vancouver is C$631,600, a 5% increase year-over-year.
In the largest city region, Greater Toronto, the 7,600 sales in August were up by 2.8% from the 7,391 transactions reported in August last year. Year-to-date sales of 64,454 were up by 6.5% over the same period last year.
The average selling price was C$546,303, up by 8.9% year-over-year. Listings, however, were down in comparison with August last year while sales increased, so that "sellers' market conditions remained in place with a lot of competition between buyers," Jason Mercer, Toronto Real Restate Board director of market analysis, said in a release.
In economically booming Alberta and especially in hotspot Calgary, sales continue to be strong. In Calgary continuing sales growth was sparked in August by record gains for condominiums and apartments, rising by nearly 14% and 20% respectively, for total sales of 790 units, because of "the relative affordability of this product combined with a tight rental market and low lending rates," said Ann-Marie Lurie, chief economist for the Calgary Real Estate Board.
Relative affordability in Calgary means that more than 76% of condominium new listings are priced under C$400,000, she said, and they total more than 68% of total inventory in the region. Condo and townhouse sales have totaled 3,388 and 2,685 sales year-to-date, a combined increase of nearly 20%, the Board said.
In Edmonton, residential sales were down in August to 1,552 from July's 1,999, with sales down across all types of properties. However, sales there were up nearly 14% over the period last year. The realtors' association said an influx of 60,000 persons into the city over the last two years has pushed home sold this year through August to 14,858 from 13,337 in the same period last year. Low interest rates and "lots of new customers" were combining to keep activity strong, the association said.
In Montreal, a short bump in activity the previous two months was not repeated in August, when the 2,234 residential sales were down by 3% and 2% from those in June and July, and down by 6% from August last year.
Most notably, Greater Montreal sales were down by 11% in August after a strong 13% rise in July. Single family homes fell in August by 3% from. The median price of condominium homes declined by 1% in August to C$285,000, their first decrease in eight months. The median price of single family detached homes was flat, year-over-year, at C$285,000.
For Canada's capital city, the Ottawa Real Estate Board reported 1,203 residential sales in August, 1.1% down from 1,216 in August last year. The average sales price of residential properties, including condos, was C$360,214, up by 3.4% over August 2013. Condos were sold for an average C$263,996, up by 1.1% over prices in August last year.
Overall in the country, housing starts fell slightly in August from July but remained strong, while prices continued to rise. The Teranet-National Bank composite house price index grew by 5% year-over-year and showed significant price gains in Toronto, Vancouver, Calgary and Edmonton, with resales strong based on price gains and low mortgage rates.
Nationally, existing home sales continue to rise, and growth remains near the five-year average. TD Economics in a report said that "mortgage credit growth remains modest, largely a function of households paying back principal more aggressively than in the past, as well as moderation in home equity withdrawals."
In fact, Statistics Canada on September 12 reported a record high of national household net worth in the second quarter this year, largely because of a 2.1% increase in the values of household assets against mortgages and other household liabilities.
The debt-to-disposable income rose slightly to 163.60% in Q2 from 163.13 in Q1. The accumulation of debt by households, while standing at very high levels historically, was outpaced by the value of real estate assets rising by 2.3% from Q1 on higher home prices.
Laura Cooper at RBC Economics wrote that the higher dept-disposable income figure "predominately reflects a seasonal bounce in mortgage borrowing." Most market analysts commented that they expect the pace of activity to slow as the so-called "transitory" effects diminish and as potential buyers hold back because of high prices.
--MNI Ottawa Bureau; tel: +1 613-853-9648; email: yndiaye@mni-news.com