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Canadian Summer Housing Market Balance Stats are Now Very Close to Normal


Under Market Updates

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August 28th, 2018

If someone hasn’t been following Canada’s real estate market over the past year, the latest data from the Canadian Real Estate Association (CREA) may give the impression that not much has happened.

After all, the average price of a home in Canada this July was $481,500, up just 1% from 12 months ago, according to the monthly CREA numbers released today.

National sales activity was also almost unchanged from last year, with July transactions down 1.3% year-over-year. Same goes for the number of new listings, which inched 2.6% lower.

But BMO Chief Economist Douglas Porter suggests these seemingly innocuous numbers don’t paint a complete picture.

“That’s an extraordinary mix of calm figures, considering the wild swings the market has witnessed in recent years. It also masks some serious regional shifts grinding away beneath the placid surface,” writes Porter in response to the data.

Specifically, Greater Toronto is stabilizing after last spring’s volatility. Sales increased a seasonally adjusted 7.7% from June and an unadjusted 17.6% annually. Meantime, the average selling price increased 4.8% year-over-year to $782,129.

“Market balance is now very close to normal, albeit with the ongoing split between condos (solid) and single-family homes (soft),” Porter continues.

CREA President Barb Sakkau suggests the more stringent mortgage underwriting guidelines introduced at the beginning of the year are not taking as much of a toll on the Toronto market as they were previously.

“This year’s new stress-test on mortgage applicants continues to weigh on home sales but its effect may be starting to fade slightly in Toronto and nearby markets,” Sakkau says in a statement.

BMO’s chief economist notes another story lost behind the Canadawide stats : the pullback in the Prairies.

In July, the average price of an Edmonton home was $376,429, a year-over-year decline of 3.5%. Calgary’s average of $462,769 was roughly flat from July 2017, but prices declined 1.5% from June.

Sales activity was down from July 2017 by 5.8% in Calgary and 1% in Edmonton, although there is reason to expect Alberta, Porter suggests.

“Firm oil prices should support confidence in the Alberta markets, but the fact is that both sales and prices are consistently down this year for both of the big cities there,” he notes.

Yet another regional divergence is playing out on the west coast. “Vancouver and other BC cities continue to post some of the biggest sales declines in the country, with the province hit by a number of measures to cool the local market,” Porter explains.

On average, homes sold for $1,024,282 in Greater Vancouver, about the same as last year, while sales have plummeted 30% since last July. However, CREA’s MLS Home Price Index shows prices on Vancouver Island were up 13.7% year-over-year.

Ottawa and Montreal remain “beacons of strength,” says Porter, and local observers are predicting more growth in these markets.

For Ottawa, the average home price of $405,279 represents an increase of 3.6% over last year. Montreal’s average price wasn’t far behind climbing 5.4% year-over-year to $392,660 last month.

Ottawa activity in July was 6.1% above last year’s level, as Montreal sales rose 6.7%.

“From an overall macro standpoint, the main takeaway is that the housing market has ceased to be a major source of concern for policymakers (neither too hot, nor too cold) — at least for now,” Porter says.

What This Summer’s Canadian Home Sales Stats Are Masking by Josh Sherman | Livabl

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