January was a cool month for the Canadian housing market, as national home sales dropped 14.5% month-over-month.

“We expect some near-term volatility to persist in the market, as the fallout from the new mortgage rules and rising interest rates is absorbed by buyers and sellers,” wrote TD senior economist Michael Dolega, in a recent note.

According to Dolega, the numbers confirm many economists’ predictions that the new mortgage rules would cause a pull-forward of sales activity in December, followed by a steep sales drop in January.

But what else does the drop in sales mean for Canadian buyers and sellers this month? Read on for BuzzBuzzNews’ roundup of this week’s need-to-read commentary.

The new construction market takes a serious hit

Ontario saw a 22% sales drop in January. The GTA new construction market was hit particularly hard, as sales of single-family homes reached their lowest level since 2000.

“The January data continues a trend we have seen in the GTA,” wrote BILD president and CEO David Wilkes, in a statement. “Our industry wants to meet consumer demand in terms of the mix and type of homes available, but we are constrained by government policy. Affordability and the lack of supply of single-family housing remain a challenge.”

But things are looking a bit more affordable, too

As the market begins to cool, buyers can look forward to some of the best affordability in years.

“Canadian housing affordability improved slightly in [Q4 of 2017], the first quarterly improvement since Q2 of 2015,” write National Bank economists Matthieu Arseneau and Kyle Dahms, in the bank’s most recent housing affordability monitor.

The bank measures housing affordability by tracking the mortgage payment on a representative home as a percentage of income, or MPPI. In Q4 of 2017 the national MPPI fell 0.2 points, after rising 3.9 points in Q3.

Those living in the red-hot Toronto market could experience the greatest price relief moving into the rest of 2018.

“In Toronto, the [interest] rate rise combined with the tax on foreign purchases seems to have suppressed demand; prices were down in Q4 and are likely to continue falling in 2018,” write the pair.

Which means a rate hike won’t be coming anytime soon

The Bank of Canada began the year by hiking the overnight rate 25 basis points to 1.25%. According to one economist, January’s low sales numbers could mean that the next hike is a long way off.

“The impacts of both the new mortgage stress test and higher mortgage rates have largely been included in the Bank of Canada’s economic forecasts,” wrote TD senior economist Fotios Raptis, in a recent note. “With households more sensitive than ever to rising interest rates, the Bank will likely wait to see inflationary pressures build further before concluding that it’s safe to raise rates again likely this July.”

What Do Slowing Sales Mean for the Canadian Housing Market? Experts Weigh In on What to Expect in Coming Months by Sarah Niedoba | Buzz Buzz Home