Canada: So much for the housing bust

Like many other economists, David Rosenberg wonders today what happened to a housing bust some observers had predicted.

“As if to purposely defy the Canadian economy, banking and loonie bears, home resale activity rose 2.8 per cent sequentially in August and over 11 per cent on a year-over-year basis,” the chief economist at Gluskin Sheff + Associates said in a research note today.

He was referring to August sales numbers released yesterday by the Canadian Real Estate Association, which, as The Globe and Mail’s Tara Perkins reports, showed a rebound from a government-induced slump a year earlier.

That’s when Finance Minister Jim Flaherty tightened mortgage rules to cool down the market and head off a bubble.

Now, homebuyers appear to be rushing to beat higher mortgage rates, boosting home sales across the country.

“The national sales/listing ratio moved up to 54.6 from 51 in July, reflecting a tighter balance to the housing market, and, as such, prices rose 8.1 per cent on a year-over-year basis, the fastest pace in over two years,” Mr. Rosenberg said.

“So much for the housing bust.”

Mr. Rosenberg is not alone.

Chief economist Douglas Porter of BMO Nesbitt Burns, for example, noted that house prices keep “quietly churning” forward, though last month’s national average was skewed by the country’s most expensive cities.

“Suffice it to say that next to no one predicted a big mid-year bounce in home sales at the start of 2013, when calls for Canadian housing market calamity were all the rage,” he said after yesterday’s numbers were released.

“Contrary to the Greek chorus of woe, sales are now above their 10-year average in seasonally adjusted terms,” he added.

“And, the year-ago comparisons will remain quite easy for the next eight months, so settle in for a spell of potentially solid year-over-year figures even if sales do simmer down notably in coming months.”

Most economists don’t fear a burst bubble.

Diana Petramala of Toronto-Dominion bank noted that sales remain 11 per cent below the 2009 peak, and that increases in longer-term mortgage rates will probably “keep housing demand in check.”

Read More on http://www.theglobeandmail.com/

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• Sean Silcoff in ROB Insight (for subscribers): If rising rates don’t cool housing, Flaherty may have to
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• Tara Perkins: Regulator eyes tighter mortgage rules
• Canadian homes among most overvalued in OECD ranking
• OECD chief on Canadian housing: It’s not a bubble (just way overvalued)