Resales down in April
OTTAWA – Home sales via the Multiple Listings Service (MLS) contracted 1.7% in April from the record high set in March and fell 7.5% on an actual year-over-year basis, according to date released by the Canadian Real Estate Association (CREA). Declines were reported in about 70% of all local markets across the country.
When compared to April 2016, sales were down most in the Lower Mainland of British Columbia, where activity continues to run well below last year’s record levels. The realtors’ group also said sales in the Greater Toronto Area also faded when compared to those a year ago.
“Sales in Vancouver are down from record levels in the first half of last year but the gap has started to close,” CREA president Andrew Peck said in a statement. “Meanwhile, sales are up in Calgary and Edmonton from last year’s lows and trending higher in Ottawa and Montreal.”
“Homebuyers and sellers both reacted to the recent Ontario government policy announcement aimed at cooling housing markets in and around Toronto,” said Gregory Klump, CREA's chief economist. “The number of new listings in April spiked to record levels in the GTA, Oakville-Milton, Hamilton-Burlington and Kitchener-Waterloo, where there had been a severe supply shortage. And with only ten days to go between the announcement and the end of the month, sales in each of these markets were down from the previous month. It suggests these housing markets have started to cool.
“Policy makers will no doubt continue to keep a close eye on the combined effect of federal and provincial measures aimed at cooling housing markets of particular concern,” he continued, adding, “while avoiding further regulatory changes that risk producing collateral damage in communities where the housing market is well balanced or already favours buyers.”
The number of newly listed homes jumped 10% in April 2017, led overwhelmingly by a 36% increase in the GTA. Housing markets in the Greater Golden Horseshoe also saw similar percentage increases.
The jump in new listings and drop in sales eased the national sales-to-new listings ratio to 60.1% in April compared to 67.3% in March. A sales-to-new listings ratio between 40 and 60 is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers' and sellers' markets respectively.
The ratio was above 60% in just over half of all local housing markets in April, mostly in British Columbia and southwestern Ontario.
The actual national average price for homes sold in April 2017 was $559,317 – up 10.4% from where it stood one year ago.
Excluding Greater Vancouver and the GTA – which remain this country’s most active and expensive housing markets – from the national average trims the total by more than $150,000.
In her note, Diana Petramala of TD Economics reminded her readers that the housing market remains a regional story. The national drop was driven by declines across southern Ontario and Quebec even though most other markets posted a modest increase.
While listings increased overall, there still seems a shortage of homes for sale in southern Ontario and mainland B.C. – where the months of inventory were below two months and three months respectively. In turn, price growth was a still hot 11% year-over-year in Vancouver and over 20% in some key Ontario markets.
She also noted April was the month where the impact of the federal government’s tightening of homeowner insurance and other mortgage regulations would be felt.
“The regional impact has varied, however, from a more immediate impact in British Columbia where the market had already begun to weaken prior to the policy changes, to a more delayed reaction in the GTA and Quebec markets,” Petramala said, adding the GTA weakness may also have been driven, in part, by buyers who decided to sit out of the market until they knew what the Ontario government planned to do in response to the hot market in Canada’s biggest city.
“Policy and tax changes should see real estate markets take a breather in the next few months, but ultimately these effects should prove temporary,” she said. “Markets in B.C. will likely be the first to trend higher given they were first to experience the slowdown. Having said that, while the effect of the basket of policy measures implemented at the federal and provincial levels begins to wear off, higher interest rates should ultimately help keep market activity from running away from underlying economic fundamentals once again.”
The TD is seeing higher mortgage rates by the end 2018, thanks to increases in the five-year government bond yield.
“Overall, we expect that housing policy changes have kick-started a soft landing, while higher mortgage should help solidify it,” Petramala said.