Home sales grow in August, prices remain flat in sign of housing market health

Home sales rose in August on a monthly basis for the first time since March but prices remained flat — signs of health in Canada’s real estate market that should deflate fears of a housing bubble.

TORONTO — Home sales rose in August on a monthly basis for the first time since March but prices remained flat — signs of health in Canada’s real estate market that should deflate fears of a housing bubble.

There were about 32,800 transactions in August, up 4.1 per cent from July on a seasonally adjusted basis, the Canadian Real Estate Association said in a report Wednesday.

However, the number of units sold was down 22 per cent from 42,350 units in August 2009.

“High sales activity late last year and earlier this year borrowed from sales this summer and will continue do so over the coming months,” Gregory Klump, CREA’s chief economist said in the report.

“This makes the return to more normal levels of sales activity look like a steep downward trend.”

Many potential buyers raced into the market while mortgage rates were at historic lows and before changes to mortgage qualification standards in April.

In addition, buyers in the hot housing markets of British Columbia and Ontario rushed to buy before the new harmonized sales tax, which applies to real estate services and some home purchases that had previously been exempt, took effect July 1.

In July, sales fell 30 per cent from the year before, when the strong housing market led Canada’s economy out of recession.

Sales have been falling steadily in recent months as demand moderates and more owners put their houses on the market. But until last month, home prices had continued to rise on a monthly basis, leading some economists to question whether the market could experience a sharp downturn.

The average price of homes sold through the Multiple Listing Service last month was $324,928, little changed from $324,843 in August 2009.

Douglas Porter, deputy chief economist at the Bank of Montreal (TSX:BMO), said the flat year-over-year numbers suggest home prices have finally started to moderate in line with falling sales.

“Average home prices were officially unchanged from year-ago levels in August,” Porter wrote in a report, adding that “we still expect that average prices will post some modest year-on-year declines by the end of this year.”

Before the August numbers were announced, there had been some renewed debate amongst economists as to whether Canada’s housing market was teetering on the edge of a U.S.-style collapse as prices continued to rise even as sales fell.

That led some industry watchers to warn that home prices could be artificially inflated and might soon see a drastic downturn.

Klump said the hangover from accelerated home purchases earlier this year were likely to persist into 2011, but won’t push the market to the brink of crisis mode.

And Porter said a renewed slide in longer-term mortgage rates in recent weeks will help to offset a slow but steady increase in the Bank of Canada’s overnight interest rate, which climbed to one per cent last week, sending banks’ prime rates and variable rate mortgages higher.

“While home sales are still nursing a bit of a hangover from the real estate party in the first half of the year, it looks like conditions are stabilizing,” he said.

“Looking ahead, sales are expected to remain on the soggy side with consumer confidence dimming, but should find support in still-low rates and steady job growth.”

In another sign of housing market health, the number of new listings was more than double the number of sales, a clear indication the market is now considered balanced, Porter said.

As a result, it would take nearly seven months for all the listings to be sold at the current pace — a slight improvement from July but still relatively high.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

House sales remain hot in central Alberta with first-quarter sales nearly double last year’s numbers. Photo by PAUL COWLEY/Advocate staff
Central Alberta real estate market hot in 2021

Residential sales nearly double 2020 in first quarter

Red Deer Mayor Tara Veer gave an update on Olymel's COVID-19 situation on Wednesday. (File photo by Advocate staff).
Veer addresses rising COVID-19 cases in Red Deer

Red Deer has added nearly 200 cases of active COVID-19 cases in past week

Alberta’s chief medical officer of health Dr. Deena Hinshaw and Premier Jason Kenney say the province would look at adding additional COVID-19 measures in the coming weeks if the virus continues to spread. (Photo by Government of Alberta)
Walk-in COVID-19 vaccination clinic to open in Red Deer

Alberta adds 1,345 new cases of the virus

Innisfail RCMP are investigating a single-vehicle crash that happened west of Bowden on March 21, 2021. (File photo by Advocate staff)
RCMP investigate culturally insensitive graffiti at Sylvan Lake school

Sylvan Lake RCMP is investigating a vandalism incident. On April 17 around… Continue reading

A vial of the Medicago vaccine sits on a surface. CARe Clinic, located in Red Deer, has been selected to participate in the third phase of vaccine study. (Photo courtesy www.medicago.com)
Red Deer clinical research centre participating in plant-based COVID-19 vaccine trial

A Red Deer research centre has been selected to participate in the… Continue reading

Vancouver Canucks' Tanner Pearson, right, celebrates after scoring against Toronto Maple Leafs goalie David Rittich during the third period of an NHL hockey game in Vancouver, on Tuesday, April 20, 2021. THE CANADIAN PRESS/Darryl Dyck
Pearson, Sutter each score twice as Canucks dump Leafs 6-3

Pearson, Sutter each score twice as Canucks dump Leafs 6-3

Everton's Gylfi Sigurdsson celebrates with teammates after scoring his side's second goal during the English Premier League soccer match between Everton and Tottenham Hotspur at Goodison Park in Liverpool, England, Friday, April 16, 2021. (Peter Powell/Pool via AP)
Super League collapses after the 6 English clubs withdraw

Super League collapses after the 6 English clubs withdraw

Boston Red Sox starting pitcher Eduardo Rodriguez delivers against the Toronto Blue Jays during the first inning of a baseball game Tuesday, April 20, 2021, at Fenway Park in Boston. (AP Photo/Winslow Townson)
Bogaerts’ 3-run HR, Rodriguez lift BoSox over Blue Jays 4-2

Bogaerts’ 3-run HR, Rodriguez lift BoSox over Blue Jays 4-2

Pound says Olympic qualifying issues a concern to IOC

Pound says Olympic qualifying issues a concern to IOC

Former University of Victoria rowing coach Barney Williams is photographed in the stands during the Greater Victoria Invitational at CARSA Performance Gym at the University of Victoria in Victoria, B.C., on Friday, November 29, 2019. THE CANADIAN PRESS/Chad Hipolito
Rowing Canada sanctions former head coach of B.C. varsity women’s team

Rowing Canada sanctions former head coach of B.C. varsity women’s team

Ontario Hockey League cancels 2020-21 season as COVID-19 cases surge in province

Ontario Hockey League cancels 2020-21 season as COVID-19 cases surge in province

Lionel Desmond (front row, far right) was part of the 2nd battalion, of the Royal Canadian Regiment, based at CFB Gagetown and shown in this 2007 handout photo taken in Panjwai district in between patrol base Wilson and Masum Ghar in Afghanistan. THE CANADIAN PRESS/HO-Facebook-Trev Bungay MANDATORY CREDIT
Desmond inquiry: Veterans Affairs submits internal review after initial refusal

Desmond inquiry: Veterans Affairs submits internal review after initial refusal

FILE - In this Feb. 18, 2021 file photo State representatives gather at the Capitol, in Phoenix. Two years after Arizona lawmakers repealed a law barring any instruction on HIV or AIDS that that "promotes a homosexual lifestyle," they are close to enacting a broad remake of the state's sex education laws with a particular focus on LGBTQ issues. (AP Photo/Matt York,File)
Arizona governor vetoes strict sex education legislation

Arizona governor vetoes strict sex education legislation

Most Read