Download the full CREA statistics report for August: here
August 2014 Report Highlights
• National home sales rose 1.8% from July to August.
• Actual (not seasonally adjusted) activity stood 2.1% above August 2013 levels.
• The number of newly listed homes fell 1.2% from July to August.
• The Canadian housing market remains in balanced territory.
• The MLS® Home Price Index (HPI) rose 5.3% year-over-year in August.
• The national average sale price also rose 5.3% on a year-over-year basis in August
RBC Economics: The August data suggest that the effect of the decline in fixed mortgages earlier this year may still fuel homebuyer demand at this stage, particularly in stronger markets such as Toronto, Calgary and Vancouver, which also benefit from favourable ‘fundamental’ factors such as rapidly growing populations (largely driven by strong in-migration). While brisk activity should be positive in theory, Canada’s housing market may be at risk of overheating if recent trends persist. We note that price increases—even though stable from July—continue to run ahead of disposable household income growth (3.9%), thereby adding to affordability pressures that are already quite intense in certain markets such as Vancouver and Toronto. Nonetheless, we expect that the market will resume its transition to lower resale levels—closer to the long-term average—and that the rate of price increases will moderate during the coming year. (Read full commentary )
TD Economics: A 30 basis point drop in mortgage rates earlier this year have delivered households an offer they can’t refuse. With mortgage rates at record low levels, housing affordability has improved. Cuts to interest rates of that degree have typically boosted sales by 30 to 40% over a six month period, which suggests the momentum may continue into October.
We continue to be surprised by the lack of listings on the market. The sales-to-listings ratio has moved back to the level reached at the end of last year, when prices were growing 8% to 9% year-over-year. This suggests that following four months of moderation, home price growth may catch a second wind through the fall months. (Read full commentary )
BMO Economics: The major potential flashpoint is that prices in the three hottest cities—Calgary, Toronto and Vancouver—are rising faster than family income, further straining affordability. The continued rapid price gains in these cities will increase their vulnerability to a shock—whether economic, interest rate, or something else. The persistent strength in these cities is no doubt what prompted the Bank of Canada to stop talking about the inevitability of a soft landing for Canadian housing, and to suggest that the sector has been stronger than they expected. But we would reinforce the message that talk about the “hot housing market” is really only a 3-city story (Read full commentary )