Photo: James Bombales

National home sales crept up 0.9 per cent month-over-month in August, part of the Canadian housing market’s current warming phase, which began earlier this summer.

While the sales bump is a welcome change from the slumping activity that characterized the first quarter of the year, it’s still nowhere near the record breaking numbers seen in the spring of 2017. But according to one economist, the market could return to its former heights.

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“Canada’s housing market has gone through a period of unusual weakness over the past year, driven by a mix of higher [interest] rates…and natural affordability barriers,” writes RBC Global Asset Management chief economist Eric Lascelles, in his most recent MacroMemo.

“The question has been whether this softness was the “big one” – the beginning of the end of the country’s decade-long housing boom, or instead a mere recalibration in response to less friendly housing parameters,” Lascelles continues. “So far, the tentative evidence suggests the latter.”

He notes that home resales and prices have rebounded in recent months, though the rate of growth it still “starkly lower” than it was in the spring of 2017.

This could mean that the market will continue its upward trajectory, slowly moving towards the red hot conditions seen over the past few years.

“[The current upward trend] raises the possibility that housing will revert to its prior ascent rather than exert a persistent drag on growth,” writes Lascelles.

But it’s by no means a sure-thing. In fact, Lascelles adds that while the market could heat up, there is a distinct possibility that it will remain relatively cool for the foreseeable future.

“To be clear, this sunny picture is not our base-case scenario,” he writes. “We continue to look for rather more sluggish growth….pockets of housing weakness, and a variety of other factors.”

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