Inven­to­ries are being drawn down, which CREA says sets the stage for mod­est price appre­ci­a­tion

Susan Krashin­sky – Globe and Mail

The hous­ing mar­ket is con­tin­u­ing to rebound, accord­ing to num­bers released Tues­day by the Cana­dian Real Estate Asso­ci­a­tion.

Home sales were up 31.5% from last quar­ter and up by 1.4% year-over-year, the first annual increase since late 2007.

The rise in sales was most marked in June, which showed the first annual increase in unit sales since Novem­ber, 2007, with a jump of 17.9% since last year.

“The gap’s been clos­ing since the begin­ning of the year,” said CREA chief econ­o­mist Gre­gory Klump. “Given the strong snap back in a num­ber of major mar­kets, it was antic­i­pated that this would be the month when we sur­passed year-ago levels.”

There are three fac­tors con­tribut­ing to this recov­ery, said Michael Gre­gory, a senior econ­o­mist with BMO Nes­bitt Burns. First, afford­abil­ity has improved. Another fac­tor is that as the prospects for eco­nomic recov­ery rise, peo­ple may be feel­ing less threat­ened on the job secu­rity front. Finally, unlike in some other coun­tries, Canada’s banks are still in a posi­tion to make loans and are show­ing a will­ing­ness to do so, he said.

“I think things have turned,” Mr. Gre­gory said. “We can quib­ble about how strong and early the recov­ery will be, but the worst is over.”

Mar­kets that saw a sharp decline in activ­ity last year have rebounded, Mr. Klump said, with the most strik­ing increases in Van­cou­ver and Victoria.

What’s more, some higher-priced homes have come back on the mar­ket as activ­ity rebounds, mean­ing that aver­age sales prices have skewed upward nationwide.

“They’re swing­ing a heav­ier bat,” Mr. Klump said.

How­ever, CREA doesn’t expect this kind of activ­ity to con­tinue. The sharp increase in sales can be partly attrib­uted to pent-up demand in the mar­ket as sales slumped late last year and early this year.

As some of that demand is sat­is­fied, Mr. Klump said, sales can be expected to level off in com­ing months.

“Cer­tainly the month-over-month increases are likely to get softer, but sales activ­ity is not going to return to very low lev­els,” Mr. Klump said. “By and large, sales activ­ity will remain strong. I just don’t antic­i­pate that these increases are going to play out month over month over the rest of the year the way they have in the last few.”

Mr. Gre­gory of BMO also pointed out that this rebound in the resale mar­ket – sales of homes that already exist – is not likely to be echoed in the growth of new home sales.

“The recov­er­ies there might be a lit­tle slower in com­ing,” he said. “We got a bit of over-building toward the end of our hous­ing boom. There could be some excess sup­ply that will need to be absorbed before hous­ing starts begin to rise again.”

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