Canada’s housing market continued to sustain upward momentum in September 2013. In its monthly statistical release, the Canadian Real Estate Association (CREA) today indicated that home resales in Canada advanced by 0.8% between August and September, thereby extending the current upswing in activity to seven months. Relative to September 2012, resales were up strongly by 18.2%, although this largely reflected significant weakness in the year ago level of sales – compared with the 10-year average, the latest tally was up by a more moderate rate of 1.8%. Despite the impressive rebound in activity since spring, home resales continued to track below last year levels on a year-to-date basis because of a very slow start to 2013. In the first nine months of this year, resales were still down 1.1% relative to the same period a year ago.

Nonetheless, sustained upward momentum in resales since the spring tightened demand-supply conditions in several key markets in Canada and this started to heat home price prices up modestly. While remaining well contained, the rate of price increases accelerated slightly for the fifth consecutive month in September, with the year-over-year rise in the national composite MLS HPI moving to 3.1% from 2.8% in August. Calgary, Saskatoon and Toronto contributed most to this annual increase.

The statistics released October 15 continue to paint a fairly sanguine picture of Canada’s housing market activity. Fears of an imminent collapse have largely receded by now while the opposite concern that the market might be rebounding too strongly will be eased by the fact that the monthly pace of resale growth slowed significantly in September from the average rate of 2.3% in the previous six months and the strong 2.9% rate recorded in August. We believe that much of the strength in recent months reflected the unwinding of earlier restraint associated with the tightening of mortgage insurance rules last year and, in August, a likely rush to lock-in lower mortgage rates. We expect home resales to stabilize near the current levels, although some modest pullback may occur later this year or early next as payback for sales that may have been advanced during the rush to lock-in lower rates. Overall, we expect total 2013 home resales to be unchanged from 2012.

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