Fewer existing houses were sold in Canada last month than had been expected, which economists said lends credence to the idea that the summer’s strong rebound was fuelled in part by buyers seeking to lock in preapproved mortgage rates.
October’s sales over the Multiple Listing Service were 8.3-per-cent higher than a year earlier, and the average sale price was up 8.5 per cent, the Canadian Real Estate Association said Friday.
Given that Vancouver’s sales were up 38 per cent, Toronto’s 19 per cent and Calgary’s 18 per cent, economists had been expecting a double-digit, year-over-year gain in national sales.
But a number of smaller cities, and broad weakness in Quebec and the Maritimes, pulled down the tally, Bank of Montreal chief economist Douglas Porter noted.
In addition, first-time buyers are not the force they once were in the market, economists at Bank of Nova Scotia said in a research note. Given that the growth rate in household-debt levels has been easing and house sales have been improving, it is not first-time buyers who are driving the market, they said.
“If they were the culprits, then mortgage growth should be accelerating,” the Scotiabank economists wrote. “Instead, it’s probably a … trade-up-or-sideways market.”
Economists also say that October’s weaker-than-expected national numbers support the notion that much of the recent market strength came from people buying homes sooner than they otherwise would have, to take advantage of lower mortgage rates.
“The resurgence in sales activity over the course of this year was likely driven by a frontloading of demand by borrowers with mortgage preapprovals jumping into the market,” Toronto-Dominion Bank economist Francis Fong said.
“Today’s report likely provides early evidence that the … increase in interest rates since the summer is finally catching up to sales activity,” Mr. Fong added.
Toronto buyer Stephanie McGillivray, a 27-year-old insurance manager, said she’s relieved she managed to buy a home in August just in time to lock in her preapproved mortgage rate. Otherwise her rate would have risen, from 2.9 per cent to about 3.3 per cent, and made the places she was looking at unaffordable.
“My mortgage rate was expiring, I had it for 120 days, and because I’m single and trying to do it on my own I couldn’t get a penny more than what I had,” she said. “I had to be in by the 5th of September or the mortgage rate went up and it would have taken me out of the market for what I wanted.”
Ms. McGillivray said she started casually house hunting earlier this year, and lost three bidding wars before obtaining her home.
“Nine out of 10 sellers are pricing their homes for a bidding war, which is where a lot of buyer frustration is coming from,” said Toronto agent Mark Savel, who represented Ms. McGillivray in her successful bid.
Toronto’s detached-home market helped to drive up the national average sales price, which was influenced by the strength in some of Canada’s pricier markets. The MLS Home Price Index, which seeks to create a more apples-to-apples comparison of prices by accounting for changes in the types and locations of homes that are selling, was up 3.5 per cent.
The Canadian Real Estate Association, which represents real estate agents, said that on a seasonally adjusted basis, house sales were 3.2 per cent lower than September, and that the dip should help to persuade policy makers in Ottawa that no more action is needed to cool the market.