With the exception of British Columbia, national home sales advanced for the sixth straight month in August, signaling Canada’s real estate market has rebounded. Revised forecasts project a boost in sales for this year and next.
Canada’s housing market seems to be picking up, according to the latest statistics from The Canadian Real Estate Association (CREA). August home sales rose 5% compared to a year earlier and 1.4% since July.
The national average price climbed 3.9% year-over-year, while the MLS Home Price Index showed 0.9% year-over-year growth and a 0.8% month-over-month increase.
CREA declared that transactions are now running almost 17% above the six-year low that was hit in February 2019. However, they remain about 10% below the highs recorded in 2016 and 2017.
Revised Forecasts for 2019 & 2020
A boost in lower mortgage rates has prompted CREA to revise its forecast for 2019 and 2020. The new forecast projects a 5% increase compared to 2018, with sales expected to reach 482,000 units and average prices rising 0.5% to $491,000. The group had previously predicted a 0.6% decrease in prices.
For 2020, CREA projects a 7.5% climb in sales to 518,100 homes and the average price to go up 2.1% to $501,400. Bank of Montreal Senior Economist Robert Kavcic, interviewed for The Globe and Mail, said:
“A solid job market and population flows persist across much of the country, amplified by a roughly 100 bps drop in five-year fixed mortgage rates since late-2018. This momentum should continue into the fall.”
Kavcic’s colleague, BMO Chief Economist, Douglas Porter, studied the total value of units sold along with price changes – without taking British Columbia real estate into consideration – and smoothed the results throughout a three-month period to ignore monthly flukes. He indicated that the value of sales was rising back to the underlying 10-year trend growth line, without considering August numbers.
Porter believes Canada is back on track after the bubble-like conditions in late 2016 and early 2017, and then the subsequent policy-induced correction.
BC Expected to Decline This Year But Rebound Next
CREA projects a 5.4% drop in home sales for British Columbia this year. However, the market is expected to more than recover by 14.3% in 2020. Home prices have been stabilizing in the past month in the region, and the number of homes sold rose from the levels one year ago in the Lower Mainland.
Porter indicated that the BC government is actively trying to temper the local market, which is in a unique situation. Efforts to cool down the Vancouver real estate market have been underway for quite some time.
At the beginning of 2018, the federal bank regulator also introduced new, nationwide mortgage-qualification stress tests – requiring homeowners to prove they can afford payments at a qualifying interest rate higher than the actual rate in the mortgage contract. Measures like this have helped moderate the housing market. CREA President, Jason Stephen, said:
“The mortgage stress-test has eased marginally and that’s helped some potential homebuyers, but the extent to which they’re adjusting to it continues to vary by community and price segment.”
According to Financial Post, Vancouver is close to rebounding. The city recorded its first month-over-month, seasonally adjusted increase in the benchmark price since March 2018. Sales have increased by 51%, and the market is balancing. Porter also believes that correction days may come to a halt for Vancouver if recent job market and interest rate fundamentals hold.