New homes are built in a housing construction development in the west end of Ottawa on Thursday, May 6, 2021.The Canadian Real Estate Association says January home sales were up 22 per cent compared with a year ago, the largest year-over-year gain since May 2021. THE CANADIAN PRESS/Sean Kilpatrick

TORONTO - Home sales rose in an unseasonably warm January to mark a second month of rising activity and softening prices, the Canadian Real Estate Association said Wednesday.

January sales were up 3.7 per cent from a month earlier after seasonal adjustments, and up 22 per cent from a year ago when sales were particularly soft.

The increase added to the 8.7 per cent seasonally adjusted jump in December activity from a month earlier.

The rise in sales is helping tighten market conditions, though areas with the highest sales gains are still seeing prices trend lower, said CREA senior economist Shaun Cathcart in a press release.

"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."

The sizable jump in January sales from a year earlier reflects how weak the market was in early 2023, when it had the worst start to almost any year in the past two decades. Sales last month were still about nine per cent below the 10-year average.

Sales gains in January from a month earlier were most notable in Ontario, which saw a seasonally adjusted 6.9 per cent gain, and B.C., where sales rose 4.5 per cent.

The aggregate benchmark price, which aims to represent price changes of a typical home, was up 0.6 per cent from a year earlier to $717,800.

However, the benchmark price fell 1.2 per cent month-over-month.

Rising activity and soft prices is mostly an Ontario and B.C. story, said TD economist Rishi Sondhi in a note.

"Our take on this dichotomy is that sellers capitulated on their asking price to move their homes, as conditions in these markets previously favoured buyers," he said.

The rise in sales, helped by the weather and falling bond yields, are moving past TD's expectations, said Sondhi.

"While we had expected Canadian home sales to increase in the first quarter ... they are on track to exceed our forecast by a considerable margin."

Rising sales outpaced the number of newly listed properties, up 1.5 per cent month-over-month, to create a more balanced market.

Sondhi said average home price growth is expected to continue in tighter markets, but that severe affordability deteriorations in some markets should limit runaway price growth.

BMO senior economist Robert Kavcic cautioned in a note that sales are generally weak in the winter months, so it won't be until spring housing numbers start to appear that there will be a clear picture on the trend.

"We’ll really need to see how the numbers start to look in March and beyond," said Kavcic.

"So far, there remain encouraging signs that the market has troughed alongside improved sentiment and some lower fixed mortgage rates — and there is pent-up demand on the sidelines."

This report by The Canadian Press was first published Feb. 14, 2024.

News from © The Canadian Press, 2024