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Home Prices Rise as The Housing Market Catches Up to Pent-Up Demand


Under Market Updates

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September 22nd, 2020

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%).

Click here to view the full report.

Home Prices Rise as The Housing Market Catches Up to Pent-Up Demand by Teranet National Bank of Canada

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