Sales of existing homes in August grew by a brisk 18.5 per cent from a year ago, data released by the Canadian Real Estate Association (CREA) showed yesterday. The average price climbed 11.3 per cent from a year earlier. On a monthly basis, however, there was a slight drop in sales from July to August, at a fraction of 1 per cent.
Still, with unemployment up to 8.7 per cent, and the spectre of deflation existing, how can housing sales enjoy such a boost?
“We’re really double dipping here,” said Benjamin Tal, a senior economist with CIBC World Markets Inc. “Not only are we enjoying the healthiest financial sector globally, therefore a financial sector that is able and willing to offer credit, also consumers are able to accept this credit … it’s all about consumer confidence.”
Without that confidence, Mr. Tal said, buyers would not be poised to take advantage of record-low interest rates, which have driven the recovery. “If I don’t have confidence that I will have my job tomorrow, you can offer me a 0-per-cent mortgage and I will not take it,” he said. “If you know your job will be there, you jump on it. That’s what’s happening. People know this will not last forever.”
Pent-up demand from the sales slump last fall may explain some of the gains, said Bank of Nova Scotia economist Derek Holt, but low mortgage rates are the dominant factor.
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