Home prices rise as sales remain steady

National home sales across Canada were "little changed" in July from a month earlier, according to the latest data from the Canadian Real Estate Association.

Sales edged up 0.2 per cent from June to July, CREA said Thursday in its monthly report on market activity, while the number of new homes listed dropped slightly by 0.4 per cent.

And yet sale prices were up a surprising 8.4 per cent year over year, pushing the national average to $382,373.

The report noted the rise in average sale prices year-over-year in specific markets, including:

• Halifax, up 2.3 per cent to $275,046
• Sherbooke, up 20.7 per cent to 251,696
• Hamilton-Burlington, up 10.8 per cent to $383,240
• Toronto, up 7.6 per cent to $513,246
• Regina, up 4.7 per cent to $311,759
• Calgary, up 7 per cent to 438,192
• Edmonton, up 2.4 per cent to 345,335
• Vancouver, up 13.5 per cent to $757,338

St. Catharines, Ont. was one of the few markets noted by CREA where prices went down – falling 10.2 per cent to $251,773.

The report may assuage fears that the hot Canadian housing market is headed for a downturn — whether a severe drop or the "soft landing" hoped for by homeowners, politicians and banks.

The market went into decline last summer after Ottawa tightened mortgage rules but has recently mounted "a bit of a recovery," said CREA chief economist Gregory Klump in a statement.

"The numbers for July suggest that national activity is levelling off at what might best be described as average levels," said Klump.

"Sales dropped sharply in August last year, so we may see some year-over-year increases in sales and average prices next month that would reflect weakness in the rear view mirror," he added.

Sales, not seasonally adjusted, rose in 9.4 per cent above levels in July 2012.

'Reasonably resilient'

Bank of Montreal chief economist Doug Porter added that the numbers may also have been inflated by the fact there were five Mondays and Tuesdays during July, traditionally two big days for closing real estate deals.

"The big picture is that the market has proven to be reasonably resilient, but I don't think it is taking off again in a meaningful way," Porter said.

He said the July numbers may also have been boosted by fence-sitters jumping into the market after mortgage rates rose in June.

"So it's debatable whether the strength will persist."

While many economists and industry watchers have said the Canadian housing market was likely to cool for a time after several years of heated sales and above-average price increases, relatively few have predicted a severe decline.

"Higher mortgage rates of late have led to some erosion in affordability … [and] this should keep a lid on sales growth in the second half of the year," agreed senior economist Sonya Gulati of Toronto-Dominion Bank in a note to clients. "But positive annual sales gains are slated for 2014."

A recent Statistics Canada report noted a 12.9 per cent decline in residential building permits and a more alarming 18.9 per cent drop in permits for multi-unit dwellings such as condos.