TD: No Holiday Cheer For Canadian Housing Market

CREA released November’s Canadian real estate figures today and it wasn’t very promising for most of the country:

  • Home sales down 1.7% from October to November.
  • Actual (not seasonally adjusted) activity down 11.9% from November 2011
  • Sales have now contracted in eight of the last eleven months
  • Number of newly listed homes down 0.9% from October to November
  • Housing market remains firmly in balanced territory (The sales-to-listings ratio was little changed – it sits at 50.3%)
  • National average price for home sales down 0.8% on a year-over-year basis in November
  • MLS® HPI up 3.5% in November, marking its smallest gain since May 2011
  • The inventory of unsold homes rests at 6.6 months. The national housing market has hovered around  the six month mark since late-2010.
(click to enlarge image)

Calgary sales have been vastly outperforming other cities (click to enlarge image)

I’ll post bank commentaries as soon as they become available.

TD Bank

tdThere is certainly an absence of holiday cheer for the Canadian resale housing market. Given recent trends and overall conditions, we were not expecting a holiday miracle.

The stricter mortgage lending rules put in place in the summer continue to influence market conditions. As originally forecast, the impact on sales has been greater than prices. This is not surprising as tighter regulations may force homeowners to think twice about selling. The rules also might be encouraging people to sit on the sidelines to wait-and-see how low prices and sales can go. Third, price changes typically lag sales changes, so it may be a few more months until we see the full impact on home prices.

The resale housing market is not expected to unravel from here on out. In other words, the Canadian housing market is not poised to undergo a U.S.-style housing correction. Instead, the brunt of theregulatory-induced slowdown has been felt on the sales front. We expect market conditions to stabilize in early 2013, as tighter mortgage rules loosen their grip on market trends and low interest rates lure homeowners back onto the market.

The slowdown in both prices and sales is most noticeable in the major urban centres of Toronto, Montréal, and Vancouver. In fact, if it were not for these three locations, there would have been a 3.2% year-over-year national price increase. While no region will be immune to less favourable economic conditions in the months ahead, Toronto, Montréal and Vancouver are more vulnerable to experience a greater-than-average housing adjustment. (Source)

Bank of Montreal

bmoWith fewer sales and affordability trimmed by a lower maximum amortization on insured mortgages, price growth continues to cool—but far from dramatically. Average transaction prices were down 0.8% from year-ago levels in November, but this figure is skewed lower by the mix of sales. Fully 21 of the
reporting 26 cities chalked up price increases from year-ago levels (including double-digit gains in Winnipeg and Regina). Only one city recorded a double-digit price drop (sorry, St. Catharines).

The more representative MLS Home Price Index also eased, but is still up 3.5% y/y (very close to the median reported price gain of 3.1%). Prices (according to the MLS measure) have now slipped 1% in the past six months, or roughly since the July mortgage rule tightening, led by a 4.5% drop in Vancouver.

Despite the klieg-light focus on the Canadian housing market this year, its
performance has been far from exciting.  It increasingly looks like most major markets are indeed undergoing a policy-induced correction. But, for now, the landing looks to be soft in most cities (with some cities actually still lifting off), with the rather obvious exception of Vancouver. (Source)


The country is at frothy all-time highs for every measure of activity in housing markets and consumer spending, and pro-cyclical housing finance policy that eased too much in 2006-07 has given way to regulatory over-tightening with further lagged negative effects ahead of us.

Housing finance conditions are tighter than they were in the depths of the crisis for different reasons, as evidenced by a slower pace of household credit growth that lies at its weakest since the moribund prospects of the 1990s. The country is unlikely to repeat the drop in rates and the rapid rebound in employment that capped the downsides to housing in the depths of the crisis and led to the quick
recovery at that time

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