According to statistics released today by The Canadian Real Estate Association (CREA), national home sales rose in June 2013, building on gains recorded over the previous three months.
- National home sales rose 3.3% from May to June.
- Actual (not seasonally adjusted) activity came in 0.6% below levels in June 2012.
- The number of newly listed homes edged down 0.5% from May to June.
- The Canadian housing market has tightened but remains in balanced territory.
- The national average sale price rose 4.8% on a year-over-year basis in June.
- The MLS® HPI rose 2.3% year-over-year in June.
I’ll round up the bank commentary as they post their thoughts.
Let’s start with the most entertaining of the bunch, BMO. Yes, still poking fun at the housing bears.
- Sales are now back to levels seen before the latest round of mortgage rule tightening took effect in early July, helped by very low mortgage rates through much of the spring.
- The recent move up in 5-year fixed rates (now in the neighbourhood of 3.5% versus sub-3% just over a month ago) might have actually stoked sales activity in June, with buyers making their move before their (lower) rate contracts expired—if so, that could set the stage for another cooling off period this summer
- Firmer sales and lower inventories have all but erased any threat of an imminent melt in prices.
- Calgary is the clear outperformer, up a strong 6.7% y/y, and now less than 3% from peak 2007 levels.
- The Bottom Line: The recent upward move in mortgage rates could temper recent sales gains through the summer, but the bigger picture is still one of a balanced and well-behaved housing market
To download BMO research note, click here
- The Canadian existing home market has almost fully shaken off the negative impact from tighter mortgage insurance rules implemented almost a year ago.
- Existing home sales rose 3.3% in June, and are now only 0.6% below their June 2012 levels (the month before the new rules were implemented).
- Existing home prices are also gaining momentum, with prices up 4.8% from year-ago levels, the sharpest increase since October 2011
- While rising rates may temper demand in the months ahead, the strength in home sales over the last four month helps to ease concerns that the Canadian housing market is headed for a deeper correction.
To download entire TD research note, click here
Royal Bank of Canada
Today’s housing statistics report from CREA should be seen as confirmation that Canada’s housing market is not currently headed for a crash landing. If anything, resale activity gained some altitude in recent months.
With the restraining effect of the mortgage insurance rule changes implemented in July 2012 now largely dissipated and assuming that no additional rule tightening is forthcoming, we expect the recent months’ rebound in activity to be sustained. Homebuyer demand will be supported by low interest rates, positive employment trends and steady population growth. Nonetheless, we believe that further gains will be limited by somewhat strained affordability, concerns about household indebtedness and global uncertainty.
Our expectation of higher interest rates in the latter half of 2014 would likely represent the next hurdle to get in the way of homebuyers in Canada. On the supply side, the high levels of condo units currently under construction in Canada’s largest markets will pose a substantial risk. We expect that the combination of flattening demand later next year and strong supply of newly completed condo units will lead to some modest price declines in 2014, mostly centered in condo segments. That being said, the possible loosening of demand-supply conditions next year is unlikely to be so severe to cause the Canadian market to shift radically from its current course.
To download entire RBC research note, click here