September 17, 2018
Slower Home Sales to Come Says August CREA Report
National home sales may have enjoyed a slight uptick in August – but don’t get used to it, as rising interest rates will challenge borrowers and dampen sales this year, reports the Canadian Real Estate Association (CREA).
The national real estate board revised its forecast for 2018 in its end-of-summer reporting, calling for a 9.8-per-cent sales decline and prices to ease 2.8 per cent to $494,900. In fact, despite a small uptick of 0.9 per cent between July and August – the fourth consecutive month to see growth – sales are on track to hit a five-year low before returning to more normal, seasonal patterns in 2019.
Mortgage Stress Test Still Impacting Market
The slow down will be due to rising interest rates and tougher mortgage qualification hurdles that are taking a chunk out of buyers’ purchasing power, despite strong economic fundamentals underpinning the market, says CREA President Barb Sukkau.
“The new stress-test on mortgage applications implemented earlier this year continues to weigh on national home sales,” she stated in CREA’s August report. “The degree to which the stress-test continues to sideline home buyers varies depending on location, housing type, and price range.”
Gregory Klump, CREA’s chief economist, says that while recent data indicates sales and prices are improving – the average Canadian home price rose 1 per cent to $475,500 in August – that’s skewed by activity in a handful of larger markets, masking downturns in others; removing the Greater Vancouver and Greater Toronto Area markets from the equation would strip $94,000 from the national average.
“Improving national home sales activity in recent months continue to obscure significant differences in regional trends for home sales and prices,” he stated. “Moreover, recent monthly sales increases are diminishing, which suggests the recent rebound may be starting to lose steam.”
CREA notes this trend will continue long-term, with double-digit sale declines expected for both the GV and GTA markets this year.
A Lack of New Listings
In the short term, however, national buying conditions actually got more competitive: a lack of newly listed homes, in combination with slightly higher sales, pushed the national sales-to-new-listings ratio to 56.6 per cent, from 56.2 in July. That’s a small nudge toward a sellers’ market; according to CREA, a ratio between 40 – 60 per cent indicates balanced conditions, while above and below reflect sellers’ and buyers’ markets, respectively. August’s ratio sits slightly above the long-term average of 53.4 per cent, which two thirds of all local markets within balanced territory.
Check out how home prices varied across Canada’s major markets in August in the infographic below:
Prices Trends By Home Type
Condos continue to see the greatest year-over-year price increases, with gains of 9.5 per cent, followed by townhomes, at an increase of 4.3 per cent. Detached home prices, however, have stayed relatively flat with one-storey houses up 0.4 per cent, and two-storey houses down -0.4 per cent.
British Columbia:While BC’s biggest markets continue to post healthy gains, that’s expected to cool this year, says CREA, as slower sales activity slowly works its way into home values. This month, Greater Vancouver real estate saw an increase of 4.1 per cent, Fraser Valley rose 10.7 per cent, and Victoria up 8.5 per cent. The rest of Vancouver Island increased a hefty 15.6 per cent.
Ontario:The Greater Golden Horseshoe markets all experienced a price uptick: Hamilton-Burlington rose 7.2 per cent, Niagara at 6.61 per cent, Guelph at 5.5. per cent, and Oakville Milton at 1.2 per cent. The GTA, typically the strongest driver of sales, however, rose only 1.4 per cent, with a 2.7 per cent decline in Barrie and District. Activity continues to boom for Ottawa homes for sale, where a 7.1-per-cent uptick was fueled by an 8.2-per-cent price increase for two-storey homes.
Prairies:There were slight price declines across the board for all Prairie markets: Calgary real estate prices fell -.2. per cent, followed up Edmonton real estate at 2.1 per cent, Regina at -.48 per cent, and Saskatoon at -2.3 per cent.
Eastern Canada:Montreal continues to enjoy strong price appreciation in line with hot demand, with home prices up 5.9 per cent, pushed by a 6.3-per-cent increase in two-storey single-family homes. Monctonalso rose 4.8 per cent, signalling strong and steady demand.