Download the full CREA statistics report for March: click here
- National home sales rose 1.0% from February to March.
- Actual (not seasonally adjusted) activity stood 4.9% above March 2013 levels.
- The number of newly listed homes edged up 0.5% from February to March.
- The Canadian housing market remains in balanced territory.
- The national average sale price rose 6.0% on a year-over-year basis in March.
- The MLS® Home Price Index (HPI) rose 5.2% year-over-year in March.
RBC Economics: While housing demand will continue to find support from steady growth in the economy and home buying-age population in Canada, we expect that it will come increasingly under pressure from eroding affordability. Affordability trends have been essentially flat during the past several years; however, the recent acceleration in home prices and the eventual rise in interest rates are likely to weigh on those trends starting later this year. We expect bond yields (the main driver of fixed mortgage rates) to drift gently upward going forward, and the Bank of Canada’s overnight rate (driving variable rates) to begin to rise in the second quarter of 2015.
We believe that increasing affordability stress will affect home resales in Canada more visibly in 2015 when we expect resales to decline by 2.1% nationally and home prices to edge lower by 0.1%. (read full commentary)
TD Economics: While the Canadian housing market appears to be recovering from frigid winter conditions, home sales still remain soft when compared to historical peaks and averages. However, Gregory Klump, the chief economist at CREA, points to bidding wars in Calgary and Toronto as evidence that perhaps the weakness in sales largely reflects too few homes for sale, and some pent-up demand may be accumulating. With banks reversing course on recent interest rate hikes (plus some), the spring market may be primed for some of that pent-up demand to be unleashed. In fact, the mortgage rate banks use to qualify homebuyers at (the five-year posted rate) hit a historical low in April.
We anticipate that the number of homes for sale will also increase in the months ahead. Home sellers will ultimately respond to the recent strong home price growth by putting their homes on the market. Meanwhile, the high number of new homes under construction will eventually be completed and add to the supply of homes for sale. Therefore, even as sales activity heats up, price growth is likely to remain in check.
From a longer-term perspective, improved economic conditions will ultimately lead to higher interest rates, which will in turn take some of the steam out of housing activity through the second half of 2014 and into 2014 (Read full commentary)
BMO: Canada’s housing market still looks balanced overall, but conditions vary widely across regions and even segments within regions. National price momentum remains firm, but gains have not been widespread across markets. Even with the tough winter, the main message appears to be that the housing market generally is holding up remarkably well
Calgary: Still hot, with sales up 20% y/y and the sales/new listings ratio at a hefty 75.6—the highest in the country, and well into sellers’ market terrain. Benchmark prices in the city are up 9.5% y/y, surpassing the 2007 peak, with a strong economy, demographics and tight supply helping. (Read full commentary)
Scotia Economics: We expect resale activity to edge lower in 2014-2015. Rising mortgage rates, combined with high home prices and stricter mortgage regulations, will strain affordability, especially for first-time buyers in major urban centres. At the same time, population growth and relatively healthy labour market conditions suggest sales should hold near their 10-year average. Softer sales should in turn slow house price appreciation, with greater downside price risk in the more amply supplied high-rise segment than for single-family homes.
The impact of a softening housing market will be felt broadly. Apart from construction, industries most affected by a housing slowdown include manufacturing, retail & wholesale trade, finance, insurance & real estate, and professional & technical services. The likelihood of smaller household wealth gains as house price growth slows — or adjusts lower — will reinforce a more cautious trend in consumer spending.
Alberta is expected to outperform national trends, with sales
and construction supported by relatively firmer employment and income gains and strong population inflows. (Read full commentary)