The Canadian Real Estate Association raised its forecast for home sales this year, helped by economic fundamentals and falling mortgage rates.
The improved outlook for the year came as CREA reported home sales in August were up five per cent compared with the same month last year.
The organization said Monday that national home sales are now projected to rise to 482,000 units this year, up five per cent from 2018.
In June, CREA predicted sales to climb 1.2 per cent to 463,000 this year.
“Economic fundamentals underpinning housing activity remain strong outside of the Prairies and Newfoundland and Labrador, the association said.
Mortgage rates declining
“More importantly for home buyers and housing markets, longer-term mortgage rates have been declining. Among those that have declined is the Bank of Canada’s benchmark five-year rate used by banks to qualify mortgage applicants.”
Home sales weakened last year after Ottawa tightened mortgage qualification rules at the start of 2018 and mortgage rates started to rise.
However, the rates on fixed-rate mortgages started to decline earlier this year and helped fuel a pick up in home sales.
In August, home sales were up in most of the country’s largest markets, including B.C.’s Lower Mainland, Calgary, Winnipeg, the Greater Toronto Area, Ottawa and Montreal.
Robert Kavcic, senior economist at BMO Capital Markets, said a solid job market and population flows persist across much of the country, amplified by a drop in five-year fixed mortgage rates since late-2018.
Strong sales predicted in autumn
“Yet again, the housing bears are going to have to take their medicine,” Kavcic wrote in a report. “This momentum should continue into the fall.”
On a month-over-month basis, home sales in August were up 1.4 per cent, the sixth consecutive move higher.
Sales were up in slightly more than half of all local markets, with gains led by Winnipeg and an improvement in B.C.’s Fraser Valley.
The actual national average price for a home sold in August was about $493,500, up almost four per cent from the same month last year.
Excluding the Greater Toronto and Greater Vancouver regions, the national average price was less than $393,000, while the year-over-year gain was 2.7 per cent.
In Greater Vancouver, the average price was $983,100, an eight per cent drop since a year ago, and in Toronto, it was $801,200, a 4.8 per cent annual increase.