Canadian housing market may Photo: Nick Kenrick/Flickr

Canadian existing home sales were up 5.9 per cent from April to May 2014, the largest month-over-month increase in nearly four years, according to the latest Canadian Real Estate Association (CREA) report.

The numbers, released by CREA earlier this week, also saw year-over-year sales rise 4.8 per cent. Sales came in 3.8 per cent above the 10-year average for May, further evidence that it was an exceptionally strong month.

“The combination of a thaw from a long winter and the recent decline in mortgage interest rates was clearly a potent combination for May home sales,” wrote TD economist Leslie Preston.

While the momentum spurred by pent-up demand for housing unleashed after the unusually long and frigid winter may continue for the next few months, Preston believes it will ebb later in the year. She also pointed to employment growth that’s modest at best and the fact that climbing house prices are continually outpacing income gains as reasons for the anticipated slowdown later in 2014.

In a report titled “Location Still Rules,” BMO senior economist Robert Kavcic said the West-East split in sales performance remains clear, despite sales rising in 23 of 26 regions tracked in May.

“[B]ecause of wide regional differences, the headline numbers do little to tell the housing market story in Canada,” he wrote. Calgary and Toronto have just over three months’ of supply on the market while Quebec, New Brunswick, Nova Scotia and PEI all have more than a year of inventory to absorb.

“[I]n most cases, those are decade highs that exceed even levels seen at the height of the Great Recession,” he wrote.

In his “bottom line” Kavcic said that Canada’s housing market looks balanced overall, but “big disparities persist below the surface.” Prices continue to rise in a few select markets and sub-markets while a large part of the country is “seeing downright dreary conditions.”

Adrienne Warren’s “Housing News Flash” for Scotiabank reached a similar conclusion to Kavcic’s report, emphasizing that the market conditions are “relatively balanced” though stronger sales numbers in the West “mask softer conditions in Central and Eastern Canada.”

Looking for more Canadian market coverage? See what the IMF and OECD are saying about the Canadian housing market (hint: it isn’t positive).

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