Higher interest rates helped national home sales inch upwards in June, from May, buoyed by buyers holding pre-approved mortgages deciding not to wait any longer, the Canadian Real Estate Association reports.
The association says sales last month were up 3.3 per cent compared with May, but down 0.6 per cent in June from a year ago, when new mortgage rules were announced.
When compared with a year ago, sales in Toronto and Montreal were lower, but their declines are beginning to shrink. Vancouver, Calgary, and Edmonton were up compared with last June.
Gregory Klump, the association’s chief economist, noted interest rates were climbing in June, and he believes that was a factor in sales.
“If the slightly higher mortgage rates persist, or edge a little bit higher, we expect to see those with pre-approved mortgages jump into the market,” Klump said.
However, these pre-approved mortgages generally expire after eight weeks, so higher interest rates will certainly have an impact on affordability in the months ahead, especially in expensive markets like Toronto or Vancouver.
“It’s borrowing a little bit of activity for the future,” Klump said of June’s numbers. “And for that reason we expect sales may well ebb as we come into the fall.”
BMO senior economist Robert Kavcic added that the increased sales show a bounce-back from tighter mortgage rules imposed by the federal government in July 2012.
Concerned about the possibility of an overheating real estate market, Finance Minister Jim Flaherty last year reduced the maximum amortization period from 30 years to 25 years on CMHC-insured mortgages.
“A lot of people were concerned that the Canadian housing would go through a weak period for sales and prices after mortgage rules were tightened,” Kavcic said.
“We did see a correction, and we were always of the view, that it was going to be temporary and the landing would be soft,” he said.
“The numbers we have seen in the past couple of months are suggesting we have seen a soft landing,” Kavcic said. “Sales are picking up again, and prices are picking up again at a pretty sustainable pace.”
The overall number of new listings for June was down 0.5 per cent on a month-over-month basis. They increased in busy markets like Hamilton-Burlington, Oakville-Milton, Vancouver, Edmonton, Saskatoon, Winnipeg and Quebec City.
But they were offset by a decline in new listings in cities like Greater Toronto, Calgary, Montreal, London-St. Thomas and Fredericton.
Klump added that the Greater Toronto market is large and varied – but called it a balanced market overall. That means when it comes to negotiation on price, both seller and buyer hold some cards at the negotiating table.
He cautioned though in some neighbourhoods, where homes rarely turn over, such as central Toronto, it’s still a seller’s market because there is little inventory on the market.
Despite the overall drop in sales from June 2012, the national average sale price last month was $386,585, up 4.8 per cent from the same month a year ago.
The association says some 240,068 homes have sold in Canada through its MLS system so far this year, down 6.9 per cent from the first half of 2012, when mortgage rules and guidelines had not yet been tightened.