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

Mon Jun 17, 2013 12:43pm EDT
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By Andrea Hopkins

TORONTO, June 17 (Reuters) - Sales of existing homes in Canada jumped in May from April and will be higher than expected both this year and next, the Canadian Real Estate Association (CREA) said on Monday, adding to evidence that the market has managed a soft landing.

CREA, the industry group for real estate agents, said sales were up 3.6 percent in May from the month before, the largest monthly gain in almost 2-1/2 years. It was the latest data to suggest the Canadian housing market - far from crashing, as some economists had predicted - is doing better than expected.

Compared with May 2012, sales were down 2.6 percent.

May's increase lifted national activity almost to where it was just before Canada's Conservative government tightened mortgage lending rules last summer, and marked what CREA called "the first noteworthy increase" in the past nine months.

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 of 2009 would be repeated in Canada. But prices, which lag sales activity, have so far only slowed their rise, and the spring market has brought the traditional seasonal bounce in home buying.

CREA said its home price index was up 2.3 percent in May from a year earlier.   Continued...