TORONTO (Reuters) - Sales of existing homes in Canada jumped in March from February and prices continued to tick higher as the winter deep freeze ended and home buyers started to come back into the market, the Canadian Real Estate Association said on Tuesday.
The industry group for Canadian real estate agents said sales activity was up 1.0 percent last month from February, and February’s gain was revised up to a 0.6-percent rise, from 0.3 percent reported previously. The back-to-back monthly gains followed five straight months of falling sales as the particularly brutal winter kept the market on hold.
“The release of pent-up demand from the winter months and a renewed downdraft in mortgage rates will help boost sales further in the coming months,” David Tulk, chief Canada macro strategist at TD Securities, said in a research note.
Actual sales for March, not seasonally adjusted, were up 4.9 percent from March 2013.
CREA’s home price index rose 5.2 percent from March 2013, a slight acceleration from February’s 5.1 percent gain.
Canada’s housing market slowed in the final months of 2013 and analysts are waiting to see whether sales will rise again in the spring, the traditional start to the home-buying season. Mortgage rates, which are expected to rise later this year and into 2015, drifted lower in recent weeks, helping spur demand.
While most are predicting a strong spring and summer, analysts expect the market to gradually cool as rising interest rates make homes less affordable.
“Listings have been light over the winter, even relative to the seasonal norm in many cities, so the real test of market health will be seen in the next few months, as both weather and listings warm up,” Avery Shenfeld, chief economist at CIBC World Markets, wrote in a research note.
“House price resilience won’t truly be put to the test, however, until mortgage rates begin to head meaningfully higher in 2015.”
Canada escaped the U.S. housing crash after the 2008-09 financial crisis and home prices have risen dramatically, if not steadily, in the past five years despite federal government moves to tighten mortgage lending rules.
While some economists have predicted the Canadian market will crash, most have said they expect sales and new construction to level off in 2014 and 2015 as mortgage rates rise, with prices continuing to tick slowly higher.
CREA’s March report showed sales rose in more than half of the regional housing markets surveyed, led by gains in large urban market in British Columbia, Alberta and Ontario.
“There’s little doubt that winter’s icy grip prompted many potential home buyers to put off house hunting,” CREA Chief Economist Gregory Klump said in the report. “That said, we’ll have to wait and see what happens in April because while overall sales improved in March, there was little evidence of a flood of pent-up demand being released.”
The number of newly listed homes was up 0.5 percent in March from February. New supply nationally has been running at lower levels since it dropped sharply in December 2013.
The national sales-to-new listings ratio was 52.5 percent in March, little changed from 52.3 percent in January and February. Since early 2010, the ratio has remained within a range of 40 to 60 percent, which marks balanced territory.
The national average price for homes sold in March, not seasonally adjusted, was C$401,419 ($366,300), an increase of 6 percent from the same month last year.
CREA’s home price index, up 5.2 percent from a year earlier, provides a better gauge of price trends because it is not affected by changes in the mix of sales activity the way that average price is.
Reporting by Andrea Hopkins; Editing by W Simon and Marguerita Choy