TD Economics
Data Release: The slowdown in the Canadian resale housing market
prevails
- National home sales slipped on a
month-over-month basis in October by 0.1%. A decline has now been
posted in seven of the last ten months. The slowdown in sales is
more noticeable on a year-over-year basis: this metric is down 0.8%.
- With listings edging down more
than sales, the sales-to-listings ratio increased to 51%. To recall,
a ratio between 40% and 60% range is indicative of fairly balanced market
conditions.
- The number of months of inventory
of unsold homes rests at 6.5 months. The national housing market has
hovered around the six month mark since late-2010.
- The average residential home price
increased by just 0.02% year-over-year. With the modest dip, the
average home price in Canada, on a non-seasonally adjusted basis, is
approximately $361,516.
- The MLS® home price index is less
distorted by the composition of sales. By this measure, prices
remain up by 3.6% when compared to October 2011. However, these
gains have significantly decreased relative to where early-2012. The
October gain is also the smallest posted since May 2011.
Key Implications
- Housing market trends in Canada
for 2012 can be characterized as before and after regulatory
changes. In the first half of the year, sales and price gains were
modest, but positive. More stringent mortgage rules and tighter
mortgage underwriting rules have ‘purposely’ knocked the wind out of the
housing market sails.
- While regulation is having the
intended impact on the housing market, it typically has only temporary
staying power. The cool down we are currently experiencing should be
lifted in early-2013. What happens thereafter is less certain.
The low interest rate environment could pull home owners back onto the
market, causing home prices to once again trek upwards.
Alternatively, an absence of pent-up demand may leave the market in a bit
of a lull until interest rate hikes resume in late-2013. Under
either scenario, it is safe to say that there is a low probability of
out-sized home price gains over the near-term.
- It is commonly said that there
is no such thing as a national housing market. This is especially true
given the regional differentiation present in Canada. Greater
Vancouver is already in the middle of its housing adjustment – the market
had simply gone too far too fast and is now pulling back. In the
last few months, the Greater Toronto Area has been losing its
lustre. Other areas like Calgary and Edmonton continue to post price
gains so far in 2012. No region will be immune from the
macroeconomic trends and regulatory developments. That being said, the
impacts to be felt will depend on location, location and location.
