The Composite index of resale home prices continued to rise in August. Indeed, 10 of the 11 markets were showing an increase in the month with the exception being a flat print in Calgary. The increases in August were consistent with conditions present in the home resale market. Looking at the active-listings-to-sales ratio as published by CREA, half of the provinces were solidly a “sellers’ market” with B.C. and Manitoba very close to showing that same status. This was the result of a new record level of home sales at the national level. The underlying data for the Composite House Price Index was consistent with the sharp rebound in activity. Indeed, the Teranet-National Bank HPI uses a sales-pair methodology to track home prices and the latter were down a mere 1.3% from a year earlier, in sharp contrast after three months of 12-month declines exceeding 20%. It must be said that there was a lot of catching up to be done given the pent-up demand from months of confinement. What’s more, mortgage interest rates have reached a record low and are an additional incentive for those looking for a property. When we seasonally adjust the unsmoothed composite index, August would be up a significant 1.7% from July, the highest monthly change in the last 40 months. Nonetheless, the housing market is facing several challenges in the months ahead. The tapering of income assistance programs in a still-depressed labour market combined with weaker immigration flows should translate into headwinds for housing demand.
HIGHLIGHTS :
• The Teranet–National Bank Composite National House Price IndexTM advanced 0.6% in August, slightly below the average over the last 22 years for a month of August (+0.7%, see right chart).
• On a monthly basis, there was a gain in 10 of the 11 markets covered: Victoria (+2.3%), Ottawa-Gatineau (+2.2%), Montreal (+1.9%), Halifax (+1.8%), Hamilton (+1.6%), Winnipeg (+0.7%), Quebec (+0.5%), Vancouver (+0.2%), Toronto (+0.1%) and Edmonton (+0.1%). Prices were essentially flat in the month in Calgary.
• From August 2019 to August 2020, the Composite index rose 5.7%, led by OttawaGatineau (+12.6%), Halifax (+11.1%), Montreal (+10.1%), Hamilton (+8.4%) and Toronto (+7.3%). Lagging the countrywide average were Victoria (+3.3%), Winnipeg (+3.3%),
Vancouver (+3.2%) and Quebec City (+2.3%). Deflating over the 12 months were Edmonton (−2.4%) and Calgary (−2.5%).
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Home Prices Rise as The Housing Market Catches Up to Pent-Up Demand by Teranet National Bank of Canada
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