Home prices in Canada up over 7% year on year but sales fell sharply in November

The national average price of a home in Canada increased by 7.3% year on year in November but sales are just 1.5% above a year ago after falling by 5.3% month on month.

Overall the home price index from the Canadian Real Estate Association (CREA) is up 14.4% year on year and

But sales are now at their lowest level since September 2015 with the largest monthly fall in activity since August 2012. Transactions were down in about two thirds of all local markets, including Canada’s most active markets.

While overall home prices rose on a year on year basis in nine of the 11 markets tracked by index, gains continued to vary widely. The Fraser Valley with a rise of 29.7% recorded the largest gain, Greater Vancouver, Victoria, Greater Toronto and Vancouver Island saw rises of 20.5%, 20.6%, 20.3% and 16.8% respectively.

By contrast, home prices were down 4% year on year in Calgary and edged lower by 1.2% in Saskatoon. As a result, home prices are off their 2015 peaks in these markets by 5.5% and 3.9% respectively.

Meanwhile, home prices were up 5.4% in Regina, by 3.4% in Ottawa, by 3.1% in Greater Montreal and by 3.5% in Greater Moncton.

The national average price for homes sold in November rose to $489,591 and continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets.

That said, Greater Vancouver’s share of national sales activity has diminished considerably of late, giving it less upward influence on the national average price. Even so, the average price is reduced by almost $130,000 to $361,260 if Greater Vancouver and Greater Toronto sales are excluded from calculations.

CREA president Cliff Iverson pointed out that November was the first full month in which the expanded stress test was in effect for home buyers with less than a 20% deposit. He also pointed out that the Government’s newly tightened mortgage regulations have dampened a wide swath of housing markets, including places not targeted directly by the government’s latest regulatory measures.

Indeed, according to CREA chief economist Gregory Klump the figures for November suggest that Canada’s housing sector is unlikely to be as strong a source for economic growth as compared to before mortgage regulations were recently tightened.

‘Housing activity generates a lot of spin-off spending, which makes its weakened prospects an additional source of uncertainty as regards the outlooks for Canadian economic and job growth,’ he explained.

The data also shows that while sales were up year on year in the Greater Toronto Area and its environs this were offset by declines in British Columbia’s lower mainland area and the number of newly listed homes edged down 0.4% in November month on month.

The national sales-to-new listings ratio declined to 59.8% in November compared to 62.9% in October. 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 almost half of all local housing markets in November, the vast majority of which are located in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario. In Greater Vancouver, the ratio has moved out of sellers’ market territory and into the mid 50% range.

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

There were 4.8 months of inventory on a national basis at the end of November 2016, up from a six year low of 4.5 months in October, and the highest level since March 2016.

However the data reveals that the tight balance between housing supply and demand in Ontario’s Greater Golden Horseshoe region is without precedent, including the Greater Toronto Area, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country.

In November, the number of months of inventory ranged between one and two months in many of these housing markets, and stood below one month in the Durham Region, Orangeville, Oakville-Milton, Kitchener-Waterloo and Cambridge.

Price growth slowed in the single family home sector while two storey single family homes and townhouse/row units recorded the biggest year on year gains in November at 16.3% and 16% respectively. Price increases were not far behind for one storey single family homes at 13.7% and apartment at 11.5%.

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