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New mortgage rules will slow sales in 2018

New mortgage rules will slow sales in 2018

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New mortgage rules will slow sales in 2018

CREA updates national resale housing market forecast

(CNW) —The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service (MLS) Systems of Canadian real estate boards and associations in 2017 and 2018.

Housing market trends continue to diverge considerably among regions along four general themes: British Columbia, the Greater Golden Horseshoe (GGH), oil and natural resource dependent provinces and everywhere else.

Driven by sales trends in the GGH, Ontario home sales have rebounded from the depths reached in the summer but remain well below the peak reached earlier this year. Recently announced changes to mortgage regulations next year may be motivating some homebuyers to advance their purchase decision before the new rules come into effect in January.

Meanwhile, sales activity in British Columbia has improved. Supported by rising activity in the Fraser Valley and on Vancouver Island, sales for the province are currently running about midway between the record levels of early 2016 and the lows reached in late 2016.

In the natural resource-intensive provinces of Alberta, Saskatchewan and Newfoundland and Labrador, sales activity is still running at lower levels and supply remains ample. As a result, average prices have flattened in Alberta and eased in Saskatchewan as well as in Newfoundland and Labrador, consistent with their elevated number of months of inventory.

In Manitoba, Eastern Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island, sales activity has been steadily improving. Combined with shrinking supply, housing markets in these regions have firmed up and average prices have been making modest gains.

CREA’s September forecast identified further changes to mortgage rules as a key downside risk. Indeed, this risk materialized in October when tighter mortgage regulations that take effect next year were announced. Among other things, the new rules make it tougher for would-be homebuyers with more than a 20 per cent down payment to qualify for a mortgage. These low-ratio mortgages comprise the vast majority of Canadian mortgage originations.

Recent research by the Bank of Canada suggests that once they come into effect, tightened mortgage rules will reduce sales activity in housing markets across Canada, particularly in and around Toronto and Vancouver. Additionally, with some homebuyers likely advancing their purchase decision before the new rules come into effect, the pull-forward of these sales may come at the expense of sales in the first half of 2018. Meanwhile, other potential homebuyers are anticipated to stay on the sidelines as they save up a larger down payment before purchasing and contributing to a modest improvement in sales activity in the second half of 2018. Taking these factors into account has led CREA to narrow its forecast decline in sales activity in 2017 and downwardly revise its sales forecast for 2018.

The anticipated decline in Canadian sales activity in the first half of 2018 due to an erosion of housing affordability from tighter mortgage regulations may be mitigated by a number of factors. Some buyers may qualify for a smaller mortgage by purchasing a lower priced home, while others may opt to stretch the amortization period when financing their purchase.

National sales activity is projected to decline by 4 per cent to 513,900 units in 2017. The majority of the annual decline reflects weakened activity in Ontario, where sales fell sharply over the spring and summer in the wake of the province’s Fair Housing Plan that was announced in April.

The national average price is expected to reach $510,400 this year, up 4.2 per cent from 2016. In recent years, average prices have been heavily skewed by large swings in British Columbia and Ontario sales, particularly for higher-priced single-family homes.

Meanwhile, prices in Eastern Ontario, Quebec, New Brunswick, Nova Scotia and Prince Edward Island have been rising following years of steadily firming market conditions. By contrast, prices were more or less flat or eased slightly in the natural resource-intensive provinces of Alberta, Saskatchewan and Newfoundland and Labrador.

In 2018, national sales are forecast to number 486,600 units, a decline of 5.3 per cent or 27,000 fewer transactions versus 2017. This is a downward revision of about 8,500 sales from CREA’s previous forecast.

The overwhelming majority of the forecast decline in sales next year reflects an expected decline in Ontario sales, with activity anticipated to remain well below the record-levels logged in early 2017. Indeed, new mortgage rules are expected to lower 2018 sales in all provinces except Quebec and Newfoundland and Labrador.

Based on research by Altus Group, the forecast annual decline of more than 27,000 sales from 2017 to 2018 translates into a decrease of $1.1 billion in economic activity and nearly 12,000 fewer jobs.

The national average price is forecast to edge down by 1.4 per cent to $503,100 in 2018, in large part due to a record number of higher-priced home sales in and around Toronto in early 2017 that is not expected to be repeated in 2018.

New mortgage rules and further interest rate increases are expected to further hold sales in check in Greater Vancouver and the GTA. As a result, the average price is forecast to hold steady in British Columbia in 2018, while declining by 2.2 per cent in Ontario.

In an extension of current trends, average prices in 2018 are forecast to rise in Quebec, New Brunswick and Nova Scotia. However, price gains in 2018 will be restrained by in all markets by tougher mortgage qualification criteria for low-ratio mortgages that will weigh on higher-end home sales activity.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 120,000 real estate brokers/agents and salespeople working through more than 90 real estate boards and associations.

SOURCE: Canadian Real Estate Association



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Homes are selling briskly throughout the GTA: CREA

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Homes are selling briskly throughout the GTA: CREA

(CNW) — According to statistics released today by The Canadian Real Estate Association (CREA), national home sales were up on a month-over-month basis in February 2017.
Home sales over Canadian MLS Systems rose by 5.2 per cent month-over-month in February 2017 to reach the highest level since April 2016.
While February sales were up from the previous month in about 70 per cent of all local markets, the national increase was overwhelmingly driven by an increase in activity across the Greater Toronto Area (GTA) and environs.


Actual (not seasonally adjusted) activity was down 2.6 per cent from levels for the same month last year. The decline reflects a moderation in sales in the Lower Mainland of British Columbia compared to extraordinarily elevated levels recorded one year ago.
“Housing market trends continue to differ by region,” said CREA president Cliff Iverson. “Homes are selling briskly throughout the Greater Toronto Area and nearby communities. Elsewhere, competition among potential buyers is less intense, so listings take longer to sell.”
“In and around Toronto, many potential move-up buyers find themselves outbid in multiple-offer situations amid a short supply of listings,” said Gregory Klump, CREA’s chief economist. “As a result, they aren’t putting their current home on the market. It’s something of a vicious circle from the standpoint of a supply shortage and a challenge for first-time and move-up homebuyers alike.
“By contrast, housing markets in urban markets elsewhere in Canada are either balanced or are amply supplied. Because housing market conditions vary by region, further tightening of mortgage regulations aimed at cooling the housing market in one region may destabilize it elsewhere.”
The number of newly listed homes rose 4.8 per cent in February 2017, led by the GTA and nearby markets following a sharp drop in January. More than one-third of all local housing markets saw new listings recede from levels the previous month, including those in the Prairies, northern Ontario and the Atlantic region. Meanwhile, new listings in the Greater Vancouver region fell significantly from January levels, having retreated by nearly 25 per cent to reach the lowest level since 2001.
With similar monthly increases in both sales and new listings, the national sales-to-new listings ratio was 69 per cent in February, little changed from 68.7 per cent in January.
A sales-to-new listings ratio between 40 and 60 is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.
The ratio was above 60 per cent in almost 60 per cent of all local housing markets in February, the majority of which are located in British Columbia, in and around the GTA and across Southwestern Ontario.
The number of months of inventory is another important measure of the balance between housing supply and demand. It represents how long it would take to completely liquidate current inventories at the current rate of sales activity.
There were 4.2 months of inventory on a national basis at the end of February 2017, down from 4.5 months in January and the lowest level for this measure in almost a decade.
The imbalance between limited housing supply and robust demand in Ontario’s Greater Golden Horseshoe region is without precedent.
The number of months of inventory in February 2017 stood below one month in the GTA, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, Cambridge, Brantford, Guelph, Barrie & District and the Kawartha Lakes region.
The Aggregate Composite MLS HPI rose by 16 per cent year-over-yeary in February 2017. This was up from January’s gain reflecting an acceleration in home price increases, particularly for single family homes in and around Toronto.
Prices for two-storey single-family homes posted the strongest year-over-year gains (+17.9 per cent), followed closely by townhouse/row units (+16 per cent), one-storey single family homes (15 per cent) and apartment units (13.7 per cent).
While benchmark home prices were up from year-ago levels in 11 of 13 housing markets tracked by the MLS HPI, price trends continued to vary widely by location.
In the Fraser Valley and Greater Vancouver, prices are slightly off their peaks posted in August 2016. That said, home prices in these regions nonetheless remain well above year-ago levels (+21.4 per cent year-over-year and +14 per cent year-over-year respectively).
Meanwhile, benchmark prices continue to climb in Victoria and elsewhere on Vancouver Island, as well as in Greater Toronto, Oakville-Milton and Guelph. Year-over-year price gains in these five markets ranged from about 18 per cent to 30 per cent in February.
By comparison, home prices were down by 1.9 per cent year-over-year in Calgary and by 1.2 per cent year-over-year in Saskatoon. Prices in these two markets now stand 5.6 per cent and 5.1 per cent below their respective peaks reached in 2015.
Home prices were up modestly from year-ago levels in Regina (+3.5 per cent), Ottawa (+3.8 per cent), Greater Montreal (+3.3 per cent) and Greater Moncton (+1.2per cent).
The MLS Home Price Index (MLS HPI) provides the best way of gauging price trends because average price trends are prone to being strongly distorted by changes in the mix of sales activity from one month to the next.
The actual (not seasonally adjusted) national average price for homes sold in February 2017 was $519,521, up 3.5 per cent from where it stood one year earlier.
The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets.
That said, Greater Vancouver’s share of national sales activity has diminished considerably over the past year, giving it less upward influence on the national average price. The average price is reduced by almost $150,000 to $369,728 if Greater Vancouver and Greater Toronto sales are excluded from calculations.
Further information can be found at http://crea.ca/statistics.

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