After reading about his alleged death in 1897 in the New York Journal, Samuel Clemens (Mark Twain), famously quipped in a letter to the newspaper, “Reports of my death have been greatly exaggerated.”
And such is also the case for the Canadian real estate market, which just months ago commentators were saying was headed toward a dramatic tailspin, but is now witnessing a strong recovery.
The Canadian Real Estate Association has been forced to revise its housing forecast for the market due to surprisingly strong results, with activity last month rising 11.1 per cent above levels reported in August 2012.
“Sales were up on a year-over-year basis in about two-thirds of local markets, led by double-digit gains in Vancouver Island, Victoria, Greater Vancouver, the Fraser Valley, Edmonton and Greater Toronto,” according to CREA’s most recent statistical report.
With the exception of Edmonton, all the other markets with double-digit increases were earlier predicted to perform abysmally in 2013.
In Winnipeg, the market was expected to chug steadily along, but after a particularly weak spring market, there was a solid recovery during the summer.
During August alone, sales in Winnipeg had risen by four per cent when compared to the same month last year. In July, the rise in sales was even more dramatic, with an increase of 13 per cent.
“Suffice it to say that next to no one predicted a big mid-year bounce in home sales at the start of 2013,” wrote Douglas Porter, the chief economist for BMO Capital Markets, in a report entitled, Pop Go the Home sales ... For Now, “when calls for Canadian housing market calamity were all the rage.
“Contrary to the Greek chorus of woe, sales are now above their 10-year average in seasonally adjusted terms,” he added. “And, the year-ago comparisons will remain quite easy for the next eight months, so settle in for a spell of potentially solid yr/yr (year-over-year) figures even if sales do simmer down notably in coming months.”
Gregory Klump, CREA’s chief economist, said a sizable increase was expected this August as a result of the mortgage rules being tightened in July 2012 and thus affecting sales in August last year.
Klump said the buyers who put off their purchase decisions due to the tighter mortgage rules — including lowering the amortization period from 30 to 25 years for Canada Mortgage and Housing Corporation-insured mortgages — were anticipated to return to the market.
“That being said,” he said, “the upward trend and levels for activity in recent months has been steeper than expected, but that may not last.
“Recent increases to fixed mortgage rates mortgage rates caused sales to be pulled forward as buyers with pre-approved financing at lower rates jumped into the market sooner than they might have otherwise,” added Klump. “That pool of home buyers has largely evaporated so demand may soften over the fourth quarter. The outsized year-over-year gains may persist (to the end of 2013), however, due to weak sales toward the end of last year.”
CREA is forecasting that the national average price is forecast to rise by 3.6 per cent to $376,300 in 2013, with the strongest gains between four and five per cent in the Prairie Provinces — Manitoba 4.6 per cent to $263,100 — and around six per cent in Newfoundland and Labrador.
The national average price is expected to rise by 1.7 per cent in 2014 to $382,800, with Alberta experiencing the highest gains at 3.4, followed by Saskatchewan 2.2 per cent), Manitoba (2.1 per cent) and Newfoundland and Labrador (2.2 per cent).
Despite predictions of average price increases, overall national sales are expected to fall by one by the end of the year when compared to 2012. In Manitoba, the decline is expected to be 2.3 per cent, but the market is forecast to recover in 2014 with a sales increase of 1.9 per cent. Nationally, sales are expected to rise by 3.5 per cent in 2014.
“While the sales figures have been up and down like a yo-yo over the past year,” said Porter, “prices just keep quietly churning ahead.
“The big event has been the snap-back in sales activity in Vancouver, a market that was all but written off by the housing bears. Sales are now up a massive 53.1 per cent yr/yr and closing in on the 10-year average,” he added.