UPDATE 1-Canadian home sales jump in June from May -CREA

Mon Jul 15, 2013 10:03am EDT
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TORONTO, July 15 (Reuters) - Sales of existing homes in Canada jumped in June from May, notching the fourth straight monthly increase, the Canadian Real Estate Association said on Monday in a report that showed buyers may be rushing to close deals ahead of a rise in mortgage rates.

The industry group for Canadian real estate agents said sales activity was up 3.3 percent in June from the month before. Actual sales for June, not seasonally adjusted, were down 0.6 percent from a year earlier.

June's increase lifted national activity almost to where it was just before Canada's Conservative government tightened mortgage lending rules last summer.

Fearing a housing bubble after years of heated activity, the government changed lending rules to make it harder for consumers to take on too much debt to buy a house. The changes, which took effect in July 2012, shortened the maximum length of a government-insured mortgage and limited the amount people can borrow against their homes.

The housing market slowed dramatically in response to the tighter rules, and some economists worried that the U.S. housing crash would be repeated in Canada. But prices, which lag sales activity, have so far only slowed their rise, and the spring market brought the traditional seasonal bounce in home buying.

CREA said its home price index was up 2.3 percent in June from a year earlier, matching the May increase.

CREA Chief Economist Gregory Klump said a rise in mortgage rates may be spurring activity. While the Bank of Canada is not expected to raise official interest rates until last 2014, Canadian lenders have raised mortgage rates in recent weeks as global bond yields inch higher.

"Increases in mortgage interest rates likely prompted some buyers with pre-approved mortgages to jump off the sidelines and into the market in June, particularly in larger, more expensive urban markets where affordability is strained," Klump said in a statement.   Continued...