For two months now, low inter­est rates have trig­gered buyer calls that swamp mort­gage bro­ker John Cocomile’s BlackBerry.

By Tony Wong – Toronto Star

John Cocomile can’t seem to walk a few steps before his Black­Berry starts to buzz. It’s another client try­ing to close on a home purchase.

“It has been like this for the last cou­ple months,” says Cocomile, a mort­gage bro­ker and owner of pop­u­lar web­site greedy​mort​gage​.com. “Real estate agents are nor­mally on hol­i­day in the sum­mer, so every­one expected things to slow down. But, good gosh, stuff is really sell­ing out there.”

He’s right. Cana­dian exist­ing homes sales soared in June, up 17.9% year over year to 54,416 units, accord­ing to the Cana­dian Real Estate Asso­ci­a­tion in a report released yesterday

The national aver­age sale price also reached new heights on a monthly basis, climb­ing 3.6% year over year to $326,613.

On a quar­terly basis, sales in the sec­ond quar­ter were up 1.4%, mark­ing the first year-over-year increase in such activ­ity since 2007.

The solid num­bers beat con­sen­sus esti­mates by ana­lysts and took some mar­ket watch­ers by surprise.

“Canada’s hous­ing mar­ket looks to have man­aged the equiv­a­lent of the great escape from the clutches of a lengthy, painful down­turn,” said BMO Cap­i­tal Mar­kets econ­o­mist Doug Porter. “The rapid fire rebound in Canada’s hous­ing mar­ket is the most aston­ish­ing eco­nomic devel­op­ment of 2009.”

Cocomile said a jump in five-year mort­gage rates in June also may have been a con­tribut­ing fac­tor to the boom. Posted rates at some banks went from 3.79% to 4.49% last month.

“You have a sit­u­a­tion now where peo­ple are say­ing: ‘If I don’t buy with my locked-in rates, then I’m going to have to pay more later if I don’t get some­thing now’,” Cocomile said.

That mini-bump in demand, com­bined with less inven­tory, has put pres­sure on prices even though Canada is offi­cially in recession.

Com­ment: Not any more. As of July 24^th, the Bank of Canada declared the reces­sion offi­cially over.

“It has cer­tainly lasted longer than I antic­i­pated and prices have been more sta­ble than I antic­i­pated,” said CREA chief econ­o­mist Gre­gory Klump. “We are see­ing some snap­back as buy­ers who were sit­ting on the fence jump into the market.”

How­ever, ana­lysts warned that the months ahead could be more volatile as the effects of the reces­sion linger.

“Only a rocket goes straight up for­ever. There will undoubt­edly be some tur­bu­lence ahead,” Klump said.

“Fur­ther gains will be much tougher to come by, par­tic­u­larly with the job mar­ket suf­fer­ing,” BMO’s Porter warned.

The Cana­dian Real Estate Asso­ci­a­tion has fore­cast a 5.2% aver­age price decrease by the end of 2009 com­pared with 2008. But, based on improv­ing con­di­tions, the asso­ci­a­tion now expects sales trans­ac­tions in the sec­ond half will exceed the first half.

Ana­lysts also expect pres­sure on prices to ease as more list­ings come onto the mar­ket in the sec­ond half.

List­ings were down sharply in June, with just 4.2 months of inven­tory on the mar­ket so buy­ers had fewer choices.

This is the low­est level since August 2007, and below the peak of 12.8 months in January.

Com­ment: We are essen­tially work­ing with 30% fewer list­ings than at this time last year. And this time last year was some­thing like 17% lower than the year before. So we have maybe half the avail­able prop­er­ties we did two years ago. Unless that changes in a major way – and soon – the bid­ding wars and price increases are just going to continue.

The months-of-inventory fig­ure is the time it would take to sell homes listed at the cur­rent rate of sales activity.

Although aver­age prices are up, demand in the more expen­sive mar­kets in the coun­try such as Toronto and Van­cou­ver was a con­tribut­ing fac­tor in skew­ing the num­bers higher.

“The strong rebound in sales activ­ity is skew­ing prices upward nation­ally and in some provinces. Just as a sharp decline in activ­ity in these mar­kets skewed the aver­age price lower in 2008,” the asso­ci­a­tion said.

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