Globe and Mail Update Last updated on Tuesday, Jul. 14, 2009 12:37PM EDT
The housing market is continuing to rebound, according to numbers released Tuesday by the Canadian Real Estate Association.
Home sales were up 31.5 per cent from last quarter and up by 1.4 per cent year-over-year, the first annual increase since late 2007.
The rise in sales was most marked in June, which showed the first annual increase in unit sales since November, 2007, with a jump of 17.9 per cent since last year.
"The gap's been closing since the beginning of the year," said CREA chief economist Gregory Klump. "Given the strong snap back in a number of major markets, it was anticipated that this would be the month when we surpassed year-ago levels."
There are three factors contributing to this recovery, said Michael Gregory, a senior economist with BMO Nesbitt Burns. First, affordability has improved. Another factor is that as the prospects for economic recovery rise, people may be feeling less threatened on the job security front. Finally, unlike in some other countries, Canada's banks are still in a position to make loans and are showing a willingness to do so, he said.
"I think things have turned," Mr. Gregory said. "We can quibble about how strong and early the recovery will be, but the worst is over."
Markets that saw a sharp decline in activity last year have rebounded, Mr. Klump said, with the most striking increases in Vancouver and Victoria.
What's more, some higher-priced homes have come back on the market as activity rebounds, meaning that average sales prices have skewed upward nationwide.
"They're swinging a heavier bat," Mr. Klump said.
However, CREA doesn't expect this kind of activity to continue. The sharp increase in sales can be partly attributed to pent-up demand in the market as sales slumped late last year and early this year.
As some of that demand is satisfied, Mr. Klump said, sales can be expected to level off in coming months.
"Certainly the month-over-month increases are likely to get softer, but sales activity is not going to return to very low levels," Mr. Klump said. "By and large, sales activity will remain strong. I just don't anticipate that these increases are going to play out month over month over the rest of the year the way they have in the last few."
Mr. Gregory of BMO also pointed out that this rebound in the resale market - sales of homes that already exist - is not likely to be echoed in the growth of new home sales.
"The recoveries there might be a little slower in coming," he said. "We got a bit of over-building toward the end of our housing boom. There could be some excess supply that will need to be absorbed before housing starts begin to rise again."