by ZooCasa
An increase in annual sales and a decrease of new listings has tightened the national real estate market in July, pushing conditions towards a sellers’ market.
Home sales followed a familiar trend, with transactions rising for the fifth month in a row. Transactions experienced a 12.6% year-over-year increase, and a 3.5% increase from June. New listings brought to market experienced no substantial changes, decreasing by only 0.4%. This has prompted national home prices to increase by 3.9% to $499,000. If the GTA and GVA markets were excluded, the average would be reduced to $393,000.
Recovery for the Canadian Housing Market?
The Canadian Real Estate Association (CREA) reports that the market has recovered by 15% from a low experienced in February. However, the market remains 10% below the peak activity from 2016 and 2017.
Sales increased in 60% of all local markets, with the lion’s share in the GVA and GTA. Additional increases were reported in Calgary, Edmonton, Hamilton-Burlington, Ottawa, Montreal, and the BC Mainland. While this jump is partly due to buyers absorbing the impacts of the mortgage stress test and lower interest rate environment, even the largest markets remain subdued compared to pre-policy levels, explains CREA’s analysts.
“The extent to which recent declines in mortgage interest rates have helped lift sales activity varies by community and price segment,” explains CREA President Jason Stephen.
CREA’s chief economist, Gregory Klump, adds that while borrowers seem to be managing the impacts of the mortgage stress test, which adds about 2% to their borrowing qualification thresholds, its impact on sales remains prevalent. This is felt especially in Toronto and Vancouver real estate markets where housing is more expensive, and among regions experiencing economic struggles.
“Sales are starting to rebound in places where they dropped when the mortgage stress test took effect at the beginning of 2018, but activity there remains well below levels recorded prior to its introduction. By the same token, sales continue to rise in housing markets where the mortgage stress test had little impact due to upbeat local economic conditions and a supply of affordably priced homes,” he explained.
“Meanwhile, the mortgage stress test is doing no favours for home buyers and sellers alike in places facing challenging local economic prospects and subdued consumer sentiment.”
Canadian Real Estate Inching Towards Sellers’ Market
From a national point of view, markets became more competitive in July. New listings remained flat and home sales increased tightening up the country’s sales-to-new-listings ratio to 59.8%, up from 57.6% in June. This ratio, which is calculated by dividing the monthly number of sales by the number of new listings, measures the degree of buyer competition within a given market. A ratio between 40 – 60% communicates a balanced market, with below signaling a buyers’ market and higher signaling a sellers’ market.
According to this standard, the national housing market is balancing on the edge of a sellers’ market with the “tightest reading and the biggest deviation above its long-term average (of 53.6%) in the past year.”
Diving deeper, however, it is reported that three quarters of all markets can be considered balanced. Nonetheless, the number of months of inventory – the amount of time it would take to sell all available housing stock on the market – dropped to 4.7 months. This is the lowest point since December 2017, and below the long-term average of 5.3 months.
This drop is attributed to an oversupply correction that plagued many markets across Canada. However, CREA explains that inventory levels vary widely across the country, sitting above average in the Prairies and Newfoundland and Labrador, and well below average in Ontario and the Maritimes.
Uneven Price Increases
The overall value of homes sold boosted slightly, reflected by 0.2% year-over-year increase by the MLS Home Price Index. This is the largest increase experienced over the last two years, attributed mainly to a 0.3% uptick in two-storey single-family home prices. One-storey single-family and condo prices remained stagnant, while the prices of townhouses dropped by 0.7%.
The uneven patterns across Canada continues, with western and prairie markets slowing and central and eastern provinces experiencing rapid growth.
Ontario: The Greater Golden Horseshoe area experienced growth with prices rising by 6.9% in Guelph, 5.9% in Niagara Region, 5% in Hamilton-Burlington, and 5% in Oakville-Milton. Prices of Toronto real estate rose by 4.4%. The Barrie and District market was the only one to experience a decline, down 1.3%. The strongest price growth in the province continues to be in Ottawa, up by 8.9%.
BC: Prices continue to drop in the GVA by 9.4%, while Fraser Valley drops by 6.7%. The decline was mild in the Okanagan Valley at 0.9%, while prices jumped by 1.2% in Victoria, and up 3.4% on Vancouver Island.
Eastern Canada: Strong price growth continues in Greater Montreal, up by 7.3%, while numbers increased by 2.4% in Greater Moncton.
Prairies: The Prairie markets continue to experience oversupply issues while home sales falter, putting downward pressure on prices. Calgary real estate is down by 3.5%, Edmonton is down by 3.2%, Regina is down by 4.4%, and Saskatoon is down by 1.3%. CREA predicts a weak pricing environment in these cities until supply and demand return to better balance.
Zoocasa is a full-service brokerage that offers advanced online search tools to empower Canadians with the data and expertise they need to make more successful real estate decisions. View real estate listings at zoocasa.com or download our free iOS app.
Photo courtesy of BlogTO