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The national average home price in Canada jumped to $729,000 in May, up 3.2 per cent from the same period last year and marking the first year-over-year gain in 12 months.

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According to figures released on June 15 by the Canadian Real Estate Association (CREA), strong sales in the Greater Toronto Area (GTA) and the B.C. Lower Mainland drove the gains.

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Nationally, sales continued their upward trend in May, increasing 5.1 per cent from April. The rise followed a significant jump in April and smaller gains in February and March. The surge in sales was observed in approximately 70 per cent of local markets, including the major markets of Toronto, Montreal, Vancouver, Calgary, Edmonton and Ottawa.

The number of transactions in May was 1.4 per cent higher than the same period last year, marking the first national year-over-year sales increase in almost two years.

“The rebound has been evident for a number of months at this point, but May really drove the point home with year-over-year comparisons for both national sales activity and national average home price back in positive territory,” CREA chair Larry Cerqua said in the report. “That being said, the degree to which a recovery will be able to play out on the sales side as opposed to the price side will come down to supply, which remains quite low.”

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Despite some positive indicators, such as an inventory increase of 6.8 per cent month-over-month in May, overall supply remains at historically low levels, CREA said.

Re/Max Canada president Christopher Alexander warned that if stock does not increase significantly, the housing market could experience further price hikes.

“Everything’s trending in the right direction but inventory is still insanely low,” Alexander said in an interview. “(And because of that) you’re going to see prices go up. Situational demand is still outpacing supply. You’ve got people that need to move for a variety of reasons. They have babies, they have to get married, they get divorced, downsizing, death, all those things. That’s what I call situational demand –– that in itself is outpacing supply.”

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Alexander did acknowledged that additional interest rate increases before the end of the year might temper price growth. However, he believes that the June interest rate increase of 0.25 was not substantial enough to significantly affect consumer confidence on its own.

“The interest rate increase was not that big and I think consumers are already really confident in the market,” he said. “(Buyers) have adjusted to the fact that this is what the right environment is going to be. Most people, unless you’re a first-time buyer, are in a good position to move out because they’ve gained a lot of equity over the years.”

CREA’s data showed the MLS Home Price Index (HPI) was up 2.1 per cent in May from the month before, but down 8.6 per cent from the year before.

The national average home price had been $716,000 in April.

• Email: shcampbell@postmedia.com

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