How short is the supply of resale housing in the GTA? At current rates of sales activity, all available housing inventory would be “liquidated” in less than a month. The Canadian Real Estate Association says that this “tight balance” between housing supply and demand in the Toronto area is “without precedent.” In the wider Greater Golden Horseshoe region (Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo-Cambridge, Brantford, Niagara, Barrie and cottage country), inventory stands at between one and two months. In the rest of the country, the number of months of inventory is a more solid 4.7 months, a number that has remained unchanged since April.

Prices, of course, tend to rise in such tight-supply conditions, and in Toronto, the year-over-year price gain was 18%, CREA says. Nationally, the average home price rose a more modest 9.5% compared to a year ago, reaching $474,590. Townhouses and single-family two-storey homes posted the biggest year-over-year price gains at 16.4% and 16.3% respectively. Bungalows and condominiums rose 14 per cent and 11 per cent respectively.

September was the first month since April in which national home sales rose. Sales were up 0.8% compared to August. On a year-over-year basis, activity was up 4.25%.

First-time home buyers, particularly in housing markets with a lack of affordable inventory of single family homes, may be priced out of the market by the new regulations that take effect on October 17. First-time home buyers support a cascade of other homes changing hands, making them the linchpin of the housing market. The federal government will no doubt want to monitor the effect of new regulations on the many varied housing markets across Canada and on the economy, particularly given the uncertain outlook for other private sector engines of economic growth.

The two salient features of the national real estate landscape remain Toronto and Vancouver. In Toronto, sales were up; in Vancouver, down. Toronto home sales were up 21.5% compared to a year ago, a near record. In Vancouver, however, home sales have been retreating “sharply” for the past five months. Vancouver sales fell further in September, though CREA says activity is now closer to “more normal levels.” The trend to lower sales in Vancouver, it should be noted, preceded the August shock of the foreign buyers tax by several months.

There was a slight increase (0.5%) in the number of new listings in September compared to August. However, as sales volume matched the number of new listings, there is essentially no change in the national sales-to-new-listings ratio, which sits at 62.1%. This indicates sellers’ market conditions, and is the status in about half of all local housing markets. The one big exception is once again Vancouver; there, with sales falling, the ratio has moved down into the mid-50s range, meaning Vancouver can now be considered a balanced market.

Though new federal mortgage eligibility regulations do not take effect until October 17 and are not reflected in these latest CREA national sales numbers, CREA president Cliff Iverson took the opportunity to warn that the new regulations “have added uncertainty among buyers and sellers” in the housing market. First-time buyers will be forced to rethink how much home they can afford to buy, he said, when the stress test for mortgage insurance comes into effect.

CREA economist Gregory Klump went further, saying first-time buyers in markets where inventory is low (Toronto) “may be priced out of the market by the new regulations.” First-time buyers are the “linchpin” of the housing market, Klump said, supporting a “cascade” of transactions as other homes change hands up the ladder. Potential damage to this key “engine of economic growth” as a result of the new regulations is something the federal government will want to monitor, he said.

CREA Warns of Cascade Effect as First-Time Buyers May Be Priced Out of Housing Market by Josephine Nolan | Condo.ca