February home sales drop
OTTAWA – Sales via its Multiple Listing Service (MLS) plummeted 9.1% in February on a month-over-month basis from January and by 4.4% on a year-over-year basis from February 2018, according to the latest figures from the Canadian Real Estate Association (CREA). The national average price fell 5.2% year-over-year.
The realtors’ group noted sales in February dropped to the lowest level since November 2012 and its month-over-month decline was the largest since January 2018. It blamed the decline on the mortgage stress test imposed by the federal government at beginning of last year.
It also reported monthly sales were down three-quarters of all local markets across the country, including all major cities.
Actual sales activity reached the lowest level for month of February since 2009 and were almost 12% below the month’s ten-year average. In British Columbia, Alberta as well as Newfoundland & Labrador, sales were more than 20% below their ten-year average for the month.
“February home sales declined across a broad swath of large and smaller Canadian cities,” Gregory Klump, CREA’s chief economist said in a statement. “The housing sector is on track to further reduce waning Canadian economic growth. Only time will tell whether successive changes to mortgage regulations went too far, since the impact of policy decisions becomes apparent only well after the fact. Hopefully policy makers are thinking about how to fine tune regulations to better keep housing affordability within reach while keeping lending risks in check.”
The number of newly listed homes declined by 3.2% in February, led by the municipalities surrounding the City of Toronto, in addition to Hamilton-Burlington, Calgary, Edmonton and Winnipeg.
With sales down by more than new listings in February, the national sales-to-new listings ratio eased to 54.1% compared to 57.6% in January. Looking beyond its monthly volatility, this measure of market balance has remained close to the long-term average of 53.5% since early 2018. CREA said about 70% of all local markets were in balanced market territory in February 2019.
There were 5.7 months of inventory on a national basis at the end of February 2019, a three-and-a-half-year high and a little above its long-term average of 5.3 months. That said, there are significant regional differences. The number of months of inventory has swollen far above its long-term average in Prairie provinces and Newfoundland & Labrador; as a result, homebuyers there have an ample choice of listings available for purchase. By contrast, the measure remains well below its long-term average in Ontario and the Maritimes.
The actual national average price for homes sold in February 2019 was $468,350 – down 5.2% from the same month in 2018. This was the fifth consecutive month during which this metric fell.
The national average price is heavily skewed by sales in Greater Vancouver Area and the Greater Toronto Area – this country’s most active and expensive markets. Excluding them trims the national average price just under $371,000.
In his research note, Brian DePratto of TD Economics described February’s performance as weak and disappointing but didn’t seem overly worried.
“As always there was no single story, with some markets remaining solid, notably Quebec. However, Vancouver, Toronto, and the Prairie markets all stood out as still struggling to find their footing,” he said.
“Still, a grain of salt is needed,” he continued. “February saw severe winter weather in both Toronto and Vancouver that may have played a role in keeping potential buyers and sellers on the sidelines. The true test of market health will come with the warmer spring weather.”
However, when considered in conjunction with construction and renovation activity, DePratto said it appears likely residential investment will be a drag on overall Canadian economic performance for the first quarter of 2019.
“Looking past near-term movements, there remain fundamental supports for housing markets,” he said. “Population growth remains robust, and we expect no further Bank of Canada rate hikes, providing a more supportive environment for buyers than previously anticipated. If rumours of policy changes to support first time homebuyers in next week’s federal budget are true, the potential buyer pool would likely be expanded further. Resale housing markets may be down, but it is too early to count them out.”