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Resale Market: Homes sales fall in 2018

Resale home sales fall in 2018

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Resale home sales fall in 2018

Highlights:

  • National home sales fell 2.5 per cent from November to December.
  • Actual (not seasonally adjusted) activity was down by 19 per cent from one year ago.
  • The number of newly listed homes was little changed from November to December.
  • The MLS Home Price Index (HPI) was up 1.6 per cent year-over-year in December.
  • The national average sale price fell by 4.9 per cent year-over-year in December.

Home sales via Canadian MLS Systems fell by 2.5 per cent in December 2018 compared to November, capping the weakest annual sales since 2012. Monthly declines in activity since September have fully retrenched its summer rally and returned it near the lowest level since early 2013.

Transactions declined in about 60 per cent of all local markets in December, led by lower activity in Greater Vancouver, Vancouver Island, Ottawa, London-St. Thomas and Halifax-Dartmouth, together with a regionally diverse mix of other large and medium sized urban centres.

Actual (not seasonally adjusted) activity was down 19 per cent year-over-year in December 2018 and stood almost 12 per cent below the 10-year average for the month of December. Sales were down from year-ago levels in three-quarters of all local markets, led overwhelmingly by the Lower Mainland of British Columbia, the Okanagan Region, Calgary, Edmonton, the Greater Toronto Area and Hamilton-Burlington. This decline, in part, is due to elevated activity posted in December 2017 as homebuyers rushed to purchase in advance of the new federal mortgage stress test that came into effect on January 1, 2018.

“What a difference a year makes,” says CREA president Barb Sukkau. “Sales trends were pushed higher in December 2017 by homebuyers rushing to purchase before the new federal mortgage stress test took effect at the beginning of 2018. Since then, the stress test has weighed on sales to varying degrees in all Canadian housing markets and it will continue to do so this year.”

“The Bank of Canada recently said that it expects housing activity will stay ‘soft’ as households ‘adjust to the mortgage stress test and increases in mortgage rates,’ even as jobs and incomes continue growing,” says Gregory Klump, CREA’s chief economist. “Indeed, the bank’s economic forecast shows it expects housing will undermine economic growth this year as the mortgage stress test has pushed homeownership affordability out of reach for some home buyers,” he added.

The number of newly listed homes remained little changed (up 0.2 per cent) from November to December, with declines in close to half of all local markets offset by gains in the remainder.

With sales down and new listings steady in December, the national sales-to-new listings ratio eased to 53.3 per cent compared to 54.8 per cent in November. This measure of market balance has remained close to its long-term average of 53.5 per cent since the beginning of 2018.

Considering the degree and duration to which market balance readings are above or below their long-term averages is the best way of gauging whether local housing market conditions favour buyers or sellers. Market balance measures that are within one standard deviation of their long-term average are generally consistent with balanced market conditions.

Based on a comparison of the sales-to-new listings ratio with the long-term average, about two-thirds of all local markets were in balanced market territory in December 2018.

The number of months of inventory is another important measure for the balance between sales and the supply of listings. It represents how long it would take to liquidate current inventories at the current rate of sales activity.

There were 5.6 months of inventory on a national basis at the end of December 2018. While this remains close to its long-term average of 5.3 months, the number of months of inventory has swollen far above its long-term average in Prairie provinces as well as in Newfoundland and Labrador. By contrast, the measure remains well below its long-term average in Ontario and Prince Edward Island. In other provinces, sales and inventory are more balanced.

The Aggregate Composite MLS Home Price Index (MLS HPI) was up 1.6 per cent year-over-year in December 2018. The increase is smaller but still broadly in line with year-over-year gains posted since July.

Apartment units posted the largest year-over-year price gains in December (4.9 per cent), followed by townhouse/row units (3.1 per cent). By comparison, two-storey single-family homes posted a small increase (0.4 per cent) while one-storey single-family home prices eased slightly (-0.3 per cent).

Trends continue to vary widely among the 17 housing markets tracked by the MLS HPI. Results were mixed in B.C. Prices are now down on a year-over-year basis in Greater Vancouver (-2.7 per cent) but remain above year-ago levels in the Fraser Valley (+2.5 per cent). Meanwhile, prices posted a year-over-year increase of 6.4 per cent in Victoria and rose 11 per cent elsewhere on Vancouver Island.

Among housing markets tracked by the index in the Greater Golden Horseshoe Area, MLS HPI benchmark home prices were up from year-ago levels in Guelph (6.8 per cent), the Niagara Region (6.8 per cent), Hamilton-Burlington (6.4 per cent ), Oakville-Milton (3.3 per cent) and the GTA (3 per cent ). Home prices in Barrie and District remain slightly below year-ago levels (-1.1 per cent).

Across the Prairies, where supply is historically elevated relative to sales, benchmark home prices remained below year-ago levels in Calgary (-3.2 per cent), Edmonton (-2 per cent), Regina (-5.2 per cent) and Saskatoon (-1.2 per cent). The home pricing environment is likely to remain weak in these housing markets until elevated supply is reduced and becomes more balanced in relation to demand.

Home prices rose 6.9 per cent year-over-year in Ottawa (led by an 8.3-per-cent increase in townhouse/row unit prices), 6 per cent in Greater Montreal (led by a 9.1-per-cent increase in townhouse/row unit prices) and 2.5 per cent in Greater Moncton (led by a 12.2-per-cent increase in townhouse/row unit prices).

The MLS HPI provides the best way to gauge price trends because average price trends are 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 December 2018 was just over $472,000, down 4.9 per cent from the same month in 2017. The year-over-year decline reflects how the jump in sales in December 2017 in advance of the stress test was more pronounced in more expensive markets. The national average price is heavily skewed by sales in Greater Vancouver and the GTA, two of Canada’s most active and expensive markets. Excluding these two markets from calculations cuts almost $100,000 from the national average price, trimming it to just under $375,000.

For more information, visit crea.ca/housing-market-stats/


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GGH

National home sales down slightly but Greater Golden Horseshoe prices holding their own

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National home sales down slightly but Greater Golden Horseshoe prices holding their own

GGH

National home sales edged down 0.4 per cent between August and September, the first decline since April, according to the Canadian Real Estate Association (CREA). While sales activity is still somewhat stronger compared to the first half of the year, it remains well below most other months since 2014.

Sales declined from August to September in slightly more than half of all local markets, led by Vancouver Island and Edmonton, along with several markets in Ontario’s Greater Golden Horseshoe (GGH) region. Activity declines in these markets were offset by monthly gains in the Fraser Valley and Montreal.

About 70 per cent of local markets were down on a year-over-year basis, led primarily by declines in major urban centres in British Columbia, along with Calgary, Edmonton and Winnipeg.

MORTGAGE STRESS TEST

“The balance between the number of homebuyers and suitable homes varies depending on location, housing type and price range,” says CREA President Barb Sukkau. “Differences in market balance will likely come into sharper focus as interest rates rise and cause this year’s new mortgage stress test to become even more restrictive.”

The number of newly listed homes rose three per cent between August and September, led by the Lower Mainland and the GTA. More than half of all local markets posted a monthly increase in new listings.

“Sales activity may get all the press, but it’s the balance between that and the number of homes for sale that sets the tone for pricing environment,” says Gregory Klump, CREA’s chief economist. “In markets with an abundant supply of homes and slower sales activity, buyers have the upper hand when it comes to negotiations over price. However, in places where buyers are keen to make a purchase but there’s a shortage of homes for sale, sellers are in the driver’s seat when it comes to price. It will be interesting to see how supply and demand respond to rising interest rates amid this year’s new mortgage stress-test.”

Based on a comparison of the sales-to-new listings ratio with the long-term average, about three-quarters of all local markets were in balanced market territory in September 2018.

The Aggregate Composite MLS Home Price Index (HPI) was up 2.3 per cent year-over-year in September – in line with those posted in each of the two previous months.

Condo units posted the largest year-over-year price gains in September (8.4 per cent), followed by townhomes (4.5 per cent). Meanwhile, one-storey and two-storey single-family home prices were little changed on a year-over-year basis.

REGIONAL VARIATION

Trends continue to vary widely among the 17 housing markets tracked by the HPI. Among the markets in the GGH, home prices were up from year-ago levels in Guelph (eight per cent), Hamilton-Burlington (6.1 per cent), the Niagara Region (5.9 per cent), the GTA (two per cent), and Oakville-Milton (1.4 per cent). By contrast, home prices slipped lower in Barrie and District (-3.6 per cent).

In BC, home price gains are diminishing on a year-over-year basis in Greater Vancouver (2.2 per cent), and Fraser Valley (8.5 per cent). Meanwhile, prices in Victoria were up 8.7 per cent year-over-year in September, and elsewhere Vancouver Island they climbed 13.2 per cent.

Across the Prairies, benchmark home prices remained below year-ago levels in Calgary (-2.6 per cent), Edmonton (-2.6 per cent), Regina (-4.7 per cent) and Saskatoon(-1.9 per cent).

Home prices rose by 6.9 per cent in Ottawa (led by an 7.9 per cent increase in two-storey single family home prices), by 6.1 per cent in Greater Montreal (led by a seven-per-cent increase in townhome prices) and by 3.4 per cent in Greater Moncton (led by a 10.3 per cent increase in condo prices).

The actual (not seasonally adjusted) national average price for homes sold in September 2018 was slightly less than $487,000, up just 0.2 per cent from the same month last year.

The national average price is heavily skewed by sales in the GVA and GTA, two of Canada’s most active and expensive markets. Excluding these two markets from calculations cuts almost $104,000 from the national average price, trimming it to just over $383,000.

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