After several months of small pullbacks, the number of houses sold in some of Canada's largest markets plummeted in July. There are plenty of factors at work - most notably the rush of buyers earlier in the year who wanted to avoid new taxes in B.C. and Ontario - but the Real Estate Board of Greater Vancouver said July was one of the slowest months for home sales in at least a decade.
As prices moved higher in 2009 and 2010, many Canadians rushed to get their houses on the market. The number of houses listed has peaked just as demand cools. At the end of June, CREA said it would take 6.9 months to sell all the listed homes in Canada given the current rate of sales - the highest level since March 2009. Sellers face a choice. Take their listings down, or settle for less.
Each quarter RBC tracks the percentage of household income taken up by home ownership costs. It expects homes to become less affordable over the next year as mortgage rates move higher. Edward Jones, the investment firm, estimates a 2 per cent rate increase works out to an extra $289.60 a month for a typical Canadian household.
Modifying a formula created by the International Monetary Fund, CIBC economist Benjamin Tal suggests average house prices have risen 14 per cent over their "fair value." He said the gains have far outstripped market fundamentals, such as income, rent and demographic changes. That means 1.5 million houses, or 17 per cent of all dwellings, have inflated prices.
At the end of 2009, consumer borrowing in Canada stood at 146 per cent of disposable income - a record high. U.S. consumers saw their rate peak at 131 per cent in 2008 before they began paying down their accounts. At the end of last year, 35 per cent of Canadians indicated they planned to pay down debt in 2010, which isn't great news for those with houses for sale.Report Typo/Error
Follow us on Twitter: