Canada's average house price reaches $416,584

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OTTAWA -- Canadian home sales picked up on May as buyers came back into the market helped by low mortgage rates, but economists cautioned against the momentum continuing.

The Canadian Real Estate Association said Monday that home sales through its Multiple Listing Service system were 5.9 per cent higher compared with April, the largest month-over-month increase in nearly four years.

TD Bank economist Leslie Preston noted the combination of the bounce back from the frigid winter that froze the market and a recent decline in mortgage rates was "clearly a potent combination for May home sales."

"Clearly pent-up demand for housing was building over the winter months, and home sales could keep some of their current momentum for a few months yet as lenders continue to advertise very attractive mortgage rates," Preston wrote in a note.

"However, employment growth is quite modest and house prices continue to outstrip gains in incomes, and TD expects that sales momentum will ebb later this year."

The gain in sales on a month-over-month basis came as the number of newly listed homes increased 3.8 per cent from April to May.

"In markets where supply had become tight, we expected sales to improve in tandem with listings," CREA chief economist Gregory Klump said in statement.

"Had it not been for such a brutal winter that delayed the launch of the spring market, the improvement in new listings and sales would likely have been more spread out over the past few months."

Sales compared with a year ago were up 4.8 per cent, however, those gains were concentrated in Western Canada, while Quebec and Atlantic Canada were lower compared with May 2013.

The gains came as the national average price for a home sold in May was $416,584, up 7.1 per cent from the same month last year, pushed higher by gains in Toronto and Vancouver.

Excluding the Greater Vancouver and Greater Toronto markets, the average price was $336,373, up 5.3 per cent from a year ago.

The Aggregate Composite MLS Home Price Index was up 4.98 per cent compared with a year ago.

BMO senior economist Robert Kavcic said the east-west split echoes economic and population growth.

"Canada's housing market continues to look balanced and sturdy overall but big disparities persist below the surface.

"One reason policy makers might be a bit hesitant to act again soon is that strong price gains are confined to a few select markets, or even sub-markets, while a wide swath of the country (at least geographically) is seeing downright dreary conditions."

Despite the strong month-over-month results, CREA trimmed its outlook for the year compared with a forecast in March.

The association is predicting sales would total 463,400 homes for the year, up 1.2 per cent compared with 2013. The updated outlook compared with the March forecast for 463,700.

"The deferral of sales and listings reflects a delayed start to the spring home buying season, with combined sales for the period from March to May coming in largely as anticipated and at average levels," the association said in its forecast.

"These deferrals are now likely to have been largely depleted, which suggests that the strength of sales momentum heading into the summer may be transient."