Those policymakers concerned about a potentially overheating Canadian housing market would have been pleased after October’s national home sales fell 3.2 percent from September. The Canadian Real Estate Association (CREA) released the figures on Nov. 15.
“This is the largest decline since August 2012,” Toronto Dominion Securities pointed out. It’s also the end of a seven-month streak of higher monthly home sales.
And while the run-up in sales in prior months was thought to be due to the rush of homebuyers locking in pre-approved mortgage rates before rates rose further, the fall in sales could now be blamed on that phenomenon having run its course.
“October’s lower activity provides early evidence confirming that sales in the later summer and early fall were boosted by homebuyers with pre-approved mortgages at lower-than-current interest rates jumping into the market before their pre-approvals expired,” Gregory Klump, CREA’s chief economist, said in a press release.
The Bank of Canada removed its bias to raising rates last month as concerns about a potentially overheating housing market were outweighed by low inflation and a growing output gap.
But what’s important now is to see if a trend is developing. “We are inclined to look through the weakness of this report and focus on the longer-term trend where we see the theme of stabilization in the housing market carry the day,” TD Securities said.
The level of sales (not seasonally adjusted) is 8.3 percent higher than last October when the government’s measures to slow down the housing market were taking effect.
Home Prices
Two slightly different measures of home prices showed modest gains year-over-year. According to the Teranet-National Bank National Composite House Price Index on Nov. 13, home prices rose 3.1 percent in October. The Multiple Listing Service (MLS) Home Price Index (HPI) rose 3.52 percent year-over-year in October, as reported by CREA on Nov. 15.
On a monthly basis, home prices stayed relatively unchanged. The year-over-year figures, on the other hand, received a boost from the low base created late last year after the government tightened home ownership rules.
While home sales have been rising (with the exception of October), National Bank suggests, “It seems that households are bargaining harder on prices to compensate for higher mortgage rates.”
By metropolitan areas, Calgary was the leader in year-over-year price increases (6.7 percent according to Teranet-National Bank and 8.17 percent according to MLS HPI). According to the Teranet-National Bank measure, prices were down for the eighth straight month in Victoria (-0.5 percent) and for the third month in a row in Halifax (-0.7 percent).
Again, for policymakers, these price increases are nothing too troubling especially when considering the month-over-month changes, which are almost non-existent.
