According to BMO Chief Economist Doug Porter, the latest data from the Canadian Real Estate Association shows that evidence continues to mount that the Canadian housing market will be able to pull off the fabled soft landing.
Existing home sales edged up 0.6 per cent in April, trimming the annual decline to 3.1 per cent year over year. Porter noted that sales have risen on a seasonally adjusted basis in 3 of the past 4 months, and are essentially unchanged since last August – the first full month of the new mortgage insurance rules.
“Most of the other key metrics are also fully in line with a well-tamed market,” added Porter. “Sales to listings stand at just over the 50 per cent line, and the backlog of unsold homes is now at an unremarkable 6.6 months.”
But it is on the price side where the stable nature of the market is perhaps most evident, according to the report.
“Despite concerns, Canadian home prices remain incredibly calm, cool, and collected,” said Porter. “Every major index for home prices is now up between 1.3 per cent and 2.2 per cent from year-ago levels. The MLS Price Index, a measure of repeat sales in seven of the largest cities, is at the top end of that range, while average transactions prices are at the low end.”
Porter added that the range of yearly price changes among the 26 largest cities was fairly narrow, in April, from a high of +6.6 per cent in Kitchener to a low of -3.4 per cent in Saguenay, Quebec. And, 20 of the 26 cities are still reporting price increases over the past year, a far cry from a hard landing and a sign of stability in Canada’s housing market.
“While some are highlighting the fact that prices are now rising at their slowest pace since the 2009 recession, the plain facts are that they are still rising faster than inflation, and prices are at all-time highs, suggesting concerns of a meltdown were unfounded.”
Porter noted that in major markets, Vancouver had been by far the weakest in the country, but there are signs even there that the market is stabilizing. Sales were down a moderate 6 per cent from year-ago levels in April, and average prices were essentially unchanged, after both metrics had posted notable declines in the first quarter of the year.
It’s a similar, more muted, picture in Toronto, where sales were down about 5 per cent from a year-ago and prices have nudged up by almost 2 per cent.
Calgary remains an outlier on the strong side, with sales up roughly 10 per cent from a year ago and prices up by almost 4 per cent. With one of the strongest job markets in the country and a sales/listings ratio above 64 per cent the picture remains quite positive for the Calgary market.
Laura Parsons, Mortgage Expert, BMO Bank of Montreal noted that it’s essential for both buyers and sellers to be aware of any changing conditions on the local level. “If planning to buy or sell a property, consider working with an expert who can help you make decisions that are appropriate to the health of your local market, and more importantly, that responsibly fit within your particular financial situation.”
Parsons added that home buyers should stress-test their mortgage against a higher interest rate to ensure they could handle any potential increases in interest rates down the road and choose a mortgage with a shorter amortization, which can help them become mortgage-free sooner.