Sales in the country’s largest markets soared in August 2013 compared to August 2012. Vancouver’s home sales alone were up an astonishing 52 percent year-over-year, followed by Calgary at 27 percent and Toronto at 21 percent.
Mortgage brokers say the significant sales activity is due to rising rates, which began to rise earlier in the summer. Many first time buyers or refinancers were pre-approved for more affordable home loans when rates averaged below 3 percent, but those pre-approvals typically expire after 4 months. Now that rates average above the 3 percent benchmark, time is running out on the lowest mortgage options for many Canadians.
Craig Alexander, Chief Economist with TD Bank, believes the surge in home sales is unlikely to continue beyond September. He says long term mortgage rates are already rising, and five year options are expected to increase by approximately one-half of a percentage point, equaling thousands of extra dollars on a loan. As a result, Alexander predicts fairly flat sales, which will also slow the rise in home prices.
“Flat is ultimately the best outcome we could have in the market. It’s not terrible for sellers, but it’s also good for buyers. And the fact that prices should rise more slowly than incomes, should ultimately reduce some of the overvaluation that is present in some of the markets.”