Canadian Housing Market Report: December 2013

Download the full CREA statistics report for December:  click here pdf

Report Highlights

  • National home sales fell 1.8% from November to December.
  • Actual (not seasonally adjusted) activity stood 12.9% above weak December 2012 levels.
  • The number of newly listed homes dropped 4.3% from November to December.
  • The Canadian housing market remains in balanced territory.
  • The national average sale price rose 10.4% on a year-over-year basis in December.
  • The MLS® Home Price Index (HPI) rose 4.3% year-over-year in December

Year-over-year price growth in the MLS® HPI was mixed across housing markets tracked by the index, led by Calgary (+8.74 per cent) and Greater Toronto (+6.31 per cent). Greater Vancouver recorded a second consecutive year-over-year increase (+2.13 per cent) following more than a year of declines between late 2012 and late 2013.

Bank Commentary

bmoBMO Economics: While the Canadian housing market garnered international attention and was a hot target for  the bears in 2013, it ended the year looking decidedly balanced overall. Sales volumes are  running almost bang on the 10-year average; the sales-to-new listings ratio sat a sturdy 55% in  December, very close to long-run norms; the inventory of homes for sale finished the year at  6.2 months’ worth, right in the range seen over the past three years; and while price growth has accelerated in the past 6 months (particularly in Vancouver and Toronto), upward drifting interest rates and balanced conditions should contain the gains this year.

It’s hard to find evidence to suggest anything but a soft landing for the Canadian housing market in 2013. Look for current balanced conditions and somewhat higher interest rates to lead to steady sales this year, with price growth tucked neatly below the rate of income growth. (Full commentary)

scotiaScotia Economics:  For the year as a whole, the volume of sales transactions was largely on par with 2012 as well as the average pace of the past decade. Demand remains supported by historically low interest rates, moderate job and income gains, and continued population growth in key homebuying demographics. Even so, a modest deterioration in affordability alongside record high home prices and the upward drift in mortgage rates appears to have tempered activity somewhat (Full commentary)

TDTD Economics:  Some of December’s decline may reflect weather conditions, as markets hit the hardest were experiencing Mars-like temperatures. However, higher mortgage interest rates appear to be taking some steam out of home demand, particularly for first time homebuyers. Five year mortgage rates have risen by 70 basis points since May. Going forward, a continued increase in longer term interest rates will offset improving economic conditions, helping to keep home sales stable in 2014 and 2015.

For the year as a whole, existing home sales rose by 0.8%, a pace that is neither too hot, nor too cold, but largely in line with our view of a soft landing in the Canadian housing market. While price gains are slightly too hot for comfort, an expected increase in homes for sale over the next two years will help provide homebuyers with more choice and hopefully bargaining power. In particular, markets experiencing the greatest gains in prices currently have a record number of new homes under construction. The completion of these units should help alleviate supply constraints.

Overall, we expect the level of sales to stabilize in 2014 and prices to grow by a more moderate 2% in the year. (Full commentary)

rbcRBC Economics: Despite the significant swings that occurred during the year, total home resales in 2013 were little changed from the 454,400 units sold in 2012…Contrary to what we saw in 2013, however, we believe that 2014 is more likely to start relatively strongly and finish on a softer note, reflecting the pressures on home buyer demand that we expect will build from rising longer-term interest rates and increasingly strained affordability.

The modest gain that we expect at the national level in 2014 will continue to mask a fairly wide range of performances at the regional level.  At one end of the spectrum, we project home resales in market in (booming) Alberta to grow strongly. (Full commentary)

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