By Paul Vieira
OTTAWA--Canada's housing market continued its supercharged recovery from pandemic-induced declines, with data for July indicating national sales reached their highest one-month level on record.
National resale figures for July from the Canadian Real Estate Association suggest sales rose 26% from the previous month. On an actual, not seasonally-adjusted, basis, sales jumped over 30% on a year-over-year basis.
The association said in July, 62,355 transactions were recorded--marking the highest monthly sales figure on record going back more than 40 years.
Shaun Cathcart, the association's senior economist, attributed July's strength partly to pentup demand; and people opting to move elsewhere, further away from their office, as working conditions change because of the pandemic. Some employers are opting to have their employees work from for the foreseeable future, to minimize the risk of contracting Covid-19.
"The new-found importance of home, lack of a daily commute for many, a desire for more outdoor and personal space, room for a home office, will certainly also spur activity that otherwise would not have happened in a non-Covid-19 world," Mr. Cathcart said.
The surprise strength in housing has also triggered warnings about financial stability in Canada. Last week, the head of Canada's state-owned mortgage insurer, Canada Mortgage and Housing Corp., warned the country's lenders to curtail the amount of credit it is extending to highly-leveraged households, warning this could derail a recovery from a sharp pandemic-induced downturn. Because of the economic fallout, CMHC expects housing prices to fall starting later this year, for a drop of as much as 18%, and forecasts that a fifth of all Canadian mortgages could be in arrears.
Benjamin Reitzes, economist at BMO Capital Markets, said in a note last week that the pace of Canadian housing sales is likely unsustainable. Housing strength could face stiff headwinds in the fall, when emergency-income benefits from the government and mortgage-payment deferrals offered by chartered banks both come to an end.
"But we've seen exactly none of that so far," Mr. Reitzes said, adding the tumbling mortgage rates "have only whetted the appetite of those still employed."
The resale data for July indicated there was 2.8 months of inventory across the country at the end of July--the lowest reading on record for this measure. At the local market level, a number of markets in Canada's biggest province, Ontario, shifted from months of inventory to weeks of inventory in July.
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