Home sales are rising – albeit slowly – following a dip in activity when the new financing rules took effect in October, according to the latest market statistics from the Canadian Real Estate Association (CREA). December 2016 saw home sales increase 2.2 per cent month-over-month. The rebound recovered less than half of the drop in activity from October to November, when it posted the biggest monthly retreat in more than four years after Ottawa tightened mortgage regulations.
Activity was up month-over-month in about 60 per cent of all local markets, led by Calgary and Edmonton, where sales rallied following large declines in November.
Sales activity was down five per cent in December from a year ago, when it reached the highest level ever for the month. The number of homes changing hands in 2016 was up by 6.3 per cent annually, reflecting strong sales activity in the first half of the year that has softened since.
“Sales set a new annual record last year,” CREA president Cliff Iverson said in a press release. “However, tightened mortgage regulations are expected to contribute to lower sales activity this year, though the extent to which they will weigh on housing markets across Canada will vary.”
“Home sales are unlikely to benefit the Canadian economy as much in 2017 as they did in 2016,” added Gregory Klump, CREA’s chief economist. “New regulations mean that in order to qualify for a mortgage, homebuyers will either have to save longer for a bigger down payment or purchase a lower priced home. In urban centres where the latter are in short supply, that’s likely to translate into fewer sales.”
The number of newly listed homes fell three per cent in December 2016 from November. New listings were down in about 60 per cent of all local markets, with declines in B.C.’s Lower Mainland, Calgary and the Greater Toronto Area. With sales up and new listings down, the national sales-to-new listings ratio rose to 63.5 per cent in December compared to 60.3 per cent in November.
A sales-to-new listings ratio between 40 and 60 per cent is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets.
The ratio was above 60 per cent in more than half of all local housing markets in December, the vast 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 4.6 months of inventory on a national basis at the end of December 2016 – down from 4.8 months in November.
The tight balance between housing supply and demand in Ontario’s Greater Golden Horseshoe region is without precedent. The region includes the GTA, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and nearby cottage country. The number of months of inventory in December ranged between one and two months in many of these housing markets, and stood below one month in the Durham Region, Orangeville, Oakville-Milton, Kitchener-Waterloo, Brantford and Cambridge.
Price gains remained strongest for two-storey single-family homes and townhouse/row units (up 16.1 and 15.4 per cent year-over-year respectively. Single-storey single-family homes followed, at 13.3 per cent year-over-year, and apartment units up 12 per cent year-over-year.
While benchmark home prices were up from year-ago levels in nine of 11 housing markets tracked by the MLS HPI, trends continued to vary widely by location.
In the Fraser Valley and Greater Vancouver, prices continued to recede from their peaks reached in August 2016 but remained above year-ago levels (up 27 and 17.8 per cent year-over-year, respectively). Meanwhile, benchmark prices climbed to new heights in Victoria and elsewhere on Vancouver Island, and in the GTA.
By comparison, home prices were down 3.7 per cent year-over-year in Calgary and edged lower by 1.6 per cent year-over-year in Saskatoon, continuing their retreat from peaks reached in 2015.
The national average price for homes sold in December 2016 was $470,661, up 3.5 per cent from a year ago, marking the smallest year-over-year increase in nearly two years.
The national average price continues to be skewed upward by Greater Vancouver and the GTA.
The average price is drops to $352,513 if Greater Vancouver and GTA sales are excluded from calculations.