July home sales set record

Karim Bardeesy, with files from The Canadian Press

Globe and Mail Update Last updated on Friday, Aug. 14, 2009 03:03PM EDT

  Canadians are still in the housing market , as more homes were sold last month than any previous July on record.

The Canadian Real Estate Association said Friday that 50,270 homes traded hands on the Multiple Listing Service in July. That's 18.2 per cent more than in July, 2008.

The Vancouver market showed considerable strength, with a 90-per-cent increase in the number of resales. Other cities saw smaller increases, with Edmonton and Toronto up 28 per cent, Calgary up 22 per cent, and Montreal up 19 per cent.

On a seasonally adjusted basis, resales are only 1.4 per cent below the peak reached in May, 2007.

The average price rose by 7.6 per cent to $362,800 over 12 months.

Although the economy has a long way to go before it returns to levels of growth seen before the recession began, there are many signs that the bottom has been reached, said CIBC chief economist Avery Shenfeld.

“I believe that when history is written, we'll see that the second quarter was the last quarter of recession, and the third quarter the quarter that marked the beginning of the climb out of the hole,” Shenfeld said in an interview.

Although Shenfeld cautioned against placing too much weight on monthly numbers, he said both manufacturing and housing are important signposts for the direction of the economy as a whole.

“Both are important in terms of defining the end of recessions and beginnings of recovery,” he said.

However, the Canadian economy is ultimately reliant to a large extent on that of the U.S., where the recovery is expected to be a gradual one.

On Friday, the University of Michigan's consumer sentiment index fell an unexpected 2.8 points to 63.2, its lowest level since March.

“If our largest trading partner only grows at a very modest pace over the next year and a half, that's going to cap how much enthusiasm we should have about the Canadian economy's prospects,” Shenfeld said.

“Canada's recession was largely an export shock, and the pace we get out of it will largely be determined outside our borders.”

Within Canada, home sales have been rebounding steadily since January, posting six consecutive monthly increases. Seasonally adjusted activity is now 61.2 per cent higher than it was at the beginning of 2009 and is only 1.4 per cent below its all-time high in May 2007, according to CREA.

“Home sales through the MLS systems in July provide clear evidence that sentiment about making major purchases continues to improve,” stated CREA chief economist Gregory Klump.

“Activity may level out over the rest of the year as home prices and mortgage lending interest rates creep higher.”

“Record-low borrowing costs and the mounting sense that the worst of the economic storm has passed are the key ingredients in the remarkable turnaround,” wrote BMO deputy chief economist Doug Porter.

“We keep saying that further gains will be harder to come by, but the market keeps churning out those gains.”

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