The housing market’s strength continued in September, with sales of existing homes across Canada coming in 18.2 per cent higher than a year earlier.
The number of homes that sold last month was slightly above the 10-year average level of sales for the month of September, indicating that the market has fully bounced back from the slump that ensued in the summer of 2012 after Finance Minister Jim Flaherty tightened the mortgage insurance rules.
Economists at Bank of Nova Scotia had correctly been forecasting a seventh consecutive monthly gain in seasonally adjusted sales for September. But they don’t think the pickup will last.
“Our view remains that sales are being brought forward at the expense of sales into next spring’s key market on mortgage interest rate concerns,” they wrote in a research note prior to the data being released. “As juicy mortgage rate commitments dating back to the early summer period face expiration, the options to purchase are being triggered before they expire and get reset higher.”
They also noted that, in addition to people who want to make use of their pre-approved mortgage rates, there is likely a general expectation among home buyers that interest rates are at a cyclical bottom.
While the market has been gaining steam the Canadian Real Estate Association pointed out Tuesday that about 340,980 homes have traded hands so far this year, a number that remains 1.8 per cent below sales in the same period last year.
The average price of homes that sold across the country last month was $385,906, up 8.8 per cent from a year earlier. But the association noted that at this time last year some of Canada’s more expensive markets, such as Toronto and Vancouver, were facing steeper sales declines than much of the country.
The MLS Home Price Index, which seeks to be an apples-to-apples comparison of prices, rose 3.13 per cent. That’s a faster pace of home price growth than the 2.8 per cent gain the index posted in August.
The Teranet-National Bank Home Price Index also posted September’s numbers Tuesday, showing a 2.7 per cent year-over-year increase in home prices (led by cities such as Hamilton, Calgary and Toronto and pulled down by smaller increases in Vancouver, Ottawa and Montreal as well as declining prices in Victoria and Halifax). But the index was unchanged from August.
The year-over-year price growth stems from the fact that the market was plunging at this time last year, National Bank economist Marc Pinsonneault suggested in a research note. This index normally picks up 0.2 per cent from August to September.
“Furthermore, it is only the third time in 15 years that prices have failed to grow in eight of the eleven regions at this time of the year,” Mr. Pinsonneault wrote. “Price behaviour seems to be at odds with the recent pickup in resale activity…It looks that households are willing to buy, but they are now bargaining harder on prices to compensate for higher mortgage rates.”