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Canadian, U.S. housing markets defy expectations, price gap hits record

The gap between the average price of a home in Canada and the United States widened to a record level in the first quarter of this year, contrary to what economists would have expected, according to Bank of Montreal’s chief economist Doug Porter.

Average Canadian home prices were 66 per cent above average U.S. prices during the first three months of this year, he says. (Note: these are prices for existing houses and condos, not those that are newly constructed).

“The main takeaway is that, contrary to all expectations, the Canadian housing market has just kept on rolling in 2014 even as the U.S. housing market has paused for breath (after a steep climb out of the dungeon),” he writes in a research note. “Put it this way, how many pundits a year ago were calling for Canadian home prices to rise faster than their U.S. counterparts in any single measure?”

This time last year it was far from clear when and if the Canadian housing market would emerge from the sales slump that ensued after former Finance Minister Jim Flaherty tightened the country’s mortgage insurance rules. It was a different story in the U.S.: a Dow Jones News Service article from April 2013 reported that home prices across the nation were “rising at the fastest rate in seven years, with some communities seeing double-digit gains, as buyers are returning to a market where the number of properties for sale is in short supply.”

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Canadian, U.S. housing markets defy expectations, price gap hits record - The Globe and Mail