UPDATE 1-Canadian home sales surge in August, to peak in Q3 -CREA

Mon Sep 15, 2014 10:33am EDT
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(Adds forecast, economist's comment, inventory details)

By Andrea Hopkins

TORONTO, Sept 15 (Reuters) - Sales of existing homes in Canada rose in August from July, hitting the highest level since January 2010, the Canadian Real Estate Association (CREA) said on Monday, but it predicted sales will peak in the third quarter and decline in 2015.

The industry group for Canadian real estate agents said sales were up 1.8 percent last month from July. Actual sales for August, not seasonally adjusted, were up 2.1 percent from August 2013.

CREA's home price index rose 5.3 percent from August 2013, matching July's year-over-year gain. The national average price for homes sold in August, not seasonally adjusted, was C$398,618 ($360,023), up 5.3 percent from the same month last year.

"Sales activity in recent months has remained stronger than was anticipated earlier this year," Gregory Klump, CREA's chief economist, said in the report.

Klump said sales bounced back after a slump early in the year that resulted from a harsh winter, a trend bolstered by a decline in mortgage rates.

The persistent sales strength has put renewed focus on concerns that Canadian households are over-reaching to get into the market and on fears of a housing bubble.

"At its last interest rate announcement, the Bank of Canada noted that conditions in the housing market were stronger-than-expected and that household imbalances were no longer evolving in a constructive manner," David Tulk, chief Canada macro strategist at TD Securities, said in a research note. "Amid low mortgage rates, this report suggests that the renewed focus on all things housing is warranted."   Continued...