Home Sales Rise Again in Canada as Falling Prices Attract Buyers

Home Sales Rise Again in Canada as Falling Prices Attract Buyers

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(Bloomberg) — Canadian home sales rose for the second month, with buyers rushing back into the market as speculation builds that prices will rise if the Bank of Canada lowers interest rates later this year.

The number of homes that traded hands rose 3.7% in January from the month before, according to data Wednesday from the Canadian Real Estate Association. Prices continued to soften, with the seasonally adjusted benchmark falling 1.2% to C$717,800 ($529,500), the fifth straight monthly decline.

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The central bank’s short-term lending rate is at its highest level in more than 20 years, but the pressure it’s putting on mortgage rates may soon ease. The Bank of Canada has now shifted its internal discussions to how long rates need to stay this high. That has prompted economists and financial markets to bet that borrowing costs will fall by midyear — which, amid a broader housing shortage that’s pushed rents up at a record pace, is widely expected to cause home prices to rise.

“Sales are up, market conditions have tightened quite a bit, and there has been anecdotal evidence of renewed competition among buyers,” Shaun Cathcart, the real estate board’s senior economist, said in a statement. “Taken together, these trends suggest a market that is starting to turn a corner but is still working through the weakness of the last two years.”

Even as sales rose last month, they remained about 9% below the 10-year average, the real estate board said. But supply is now starting to tighten. One measure of inventory, the number of months it would take to clear all the houses on market at the current rate of sales, fell to 3.7 months in January from 4.1 in November. 

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While the number of new listings rose 1.5% compared with December, it remains close to the lowest level since June, the real estate board said.

Read More: Housing Minister Banks on Canada Rate Cuts to Spur Building Boom

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