June Home Sales Improve as Market “Turns Corner”: CREA

A slight uptick in sales last month could be a sign of improved housing market stability, according to the Canadian Real Estate Association, as buyers have finally absorbed the impact from tougher mortgage qualification rules introduced at the beginning of the year.

However, year-over-year performance continues to fall short, with a 10.7-per-cent decline in sales, and prices softening by 1.3 per cent to an average of $496,000. That’s a nine-year low and the fifth month in a row that home values have fallen, though by the smallest amount, CREA notes. The MLS Home Price Index rose just 0.9 per cent, the 14th consecutive month of deceleration, and largely led by price declines in the Greater Golden Horseshoe.

Reason for Optimism

Despite year-over-year declines, though, the 4.1-per-cent increase between May and June, reflects the “first substantive month-over-month increase this year” and could indicate demand is starting to recover, says CREA’s President Barb Sukkau. “This year’s new stress-test on mortgage applicants has been weighing on home sales activity; however, the increase in June suggests its impact may be starting to lift,” she says.

Adds Chief Economist Gregory Klump, “The national increase in June home sales suggests activity may indeed by starting to turn the corner,” he says, though noting the rising interest rate environment will continue to be a barrier to home affordability.

“Even so, the number of homes trading hands has a long way to go before it returns to levels posted in recent years. Looking ahead, home sales activity and price gains will likely be held in check by higher interest rates.”

On Wednesday, July 11, the Bank of Canada hiked its trend-setting interest rate to 1.5 per cent, prompting consumer lenders to increase their Prime variable borrowing rate to 3.7 per cent. As well, fixed-rate pricing faces upward pressure from the resulting volatility in the bond market, pointing to an overall higher cost of borrowing for both new and renewing mortgage applicants.

Buyer Competition Heats Up

The supply of new homes for sale declined 1.8 per cent; combined with the small increase in June sales, that has tugged the market slightly toward sellers’ conditions, with a national sales-to-new-listings ratio of 54.3 per cent, up from 51.2 per cent in May.

This ratio, which is calculated by dividing the number of sales by the number of new listings over a specific time period in a region, sheds light on the level of competition in a given market. A ratio between 40 –60 per cent indicates a balanced market, with below and above signalling buyers’ and sellers’ conditions, respectively.

According to CREA, two thirds of all markets remain in balanced territory.

The level of inventory – the number of months it would take to completely sell all of the available homes on the market – sat at 5.4 months in June, down from the 5.6 in May, which was a three-year high.

Apartments continue to lead the market in terms of price growth, reflecting their status as one of the last remaining affordable points of entry for many buyers in Canada’s largest markets, with values up 11.3 per cent. That’s followed by townhouse prices at 4.9 per cent, hough this housing type is starting to see price deceleration.

Single-family home values both declined, with one-storey homes down 1.8 per cent, and two-story by 4.1 per cent.

June Home Sales and Prices Across Canada

Check out the infographic below to see how values have fared in Canada’s largest markets in June:

canada-home-prices-june-2018-zoocasa

About Penelope Graham

Penelope Graham is the Managing Editor at Zoocasa. A born-and-bred Torontonian and quintessential millennial, she has over a decade of experience covering real estate, lifestyle and personal finance topics. When not keeping an eye on Toronto's hot housing market, she can be found brunching in one of the city's many vibrant neighbourhoods. Find her on Twitter at @pjeg14.