Home Builds, Prices, Sales all up in July

It’s time for our monthly housing market check-up:

New Home Construction Down Monthly

The number of newly-built homes in Canada dropped by 9.6% in July, led mostly by a drop in construction of row houses and apartments.

The seasonally adjusted annual rate (SAAR) of housing starts dropped from 245,455 units in June to 222,013 units last month, Canada Mortgage and Housing Corporation (CMHC) said. That still beat the median forecast of 202,000 units in a Bloomberg survey.

Multiple urban starts fell by 12% to 162,722, while single-detached urban starts declined by 4.6% to 46,400 units. Meanwhile, rural starts were estimated at a SAAR of 12,891 units.

Despite a decrease in the level of SAAR activity, the national trend in housing starts increased from 205,765 units in June to 208,970 units in July.

“High levels of activity in apartment and row starts in urban centres in recent months continued to be reflected in the high level of the total starts trend in July,” said Bob Dugan, CMHC’s chief economist.

Home Prices See Small Gains

National home prices saw modest gains last month both on a monthly and annual basis, according to the Canadian Real Estate Association (CREA).

CREA’s seasonally adjusted, national benchmark price hit $620,900, up by 0.57% from June and by 0.22% from July 2018.

Housing markets that underperformed over the past five years saw the largest increase: Ottawa, Montreal, and Guelph. Six other markets saw their benchmark price rise from the previous year: Niagara, Oakville-Milton, Hamilton-Burlington, Toronto, Moncton, and Victoria.

Meanwhile, western Canadian housing markets saw the sharpest declines: Greater Vancouver, Fraser Valley, and Regina. Four other markets saw their benchmark price fall from last year: Calgary, Edmonton, Barrie, and Saskatoon.

Home Sales Continue Upward Trajectory

Home sales across Canada rose for the fifth consecutive month last month, according to CREA.

CREA’s data revealed that national home sales rose by 3.5% from June and 12.6% from July 2018. Gregory Klump, CREA’s chief economist, said that the continuing rise in home sales could be attributed to recovery from stress test tightening last year.

“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,” Klump said. “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. Meanwhile, the mortgage stress test is doing no favours for homebuyers and sellers alike in places facing challenging local economic prospects and subdued consumer sentiment.”

Home-sales activity advanced in about 60% of all local markets, according to CREA. While the monthly increase was led by Greater Vancouver and the Greater Toronto Area, sales there remain well below levels recorded prior to the mortgage stress test that came into effect in 2018.