Canada's housing market is slowing markedly, and rapidly, but not to the extent that some observers had feared.
Canadian home sales plunged 15.1 per cent in September from a year earlier, with more than half of the country's markets down by at least 10 per cent, according to data from the Canadian Real Estate Association.
But adjusting the numbers for seasonal trends, September's sales edged up 2.5 per cent from August, marking the first monthly increase since March and suggesting that sales weren't as dire as some expected. The CREA reading is key given fears of a housing bubble, particularly in key centres such as Vancouver and Toronto.
National home sales in September were 15.1 per cent below a year ago, with more than half of the country's local markets down by at least 10 per cent.
But, adjusting the numbers for seasonal trends, September's sales edged up 2.5 per cent from August's, the Canadian Real Estate Association (CREA) said Monday. That marks the first monthly increase since March.
But even Greater Vancouver showed a month-over-month rise in sales on a seasonally-adjusted basis.
According to the Real Estate Board of Greater Vancouver, there were 1,516 sales in September, down 8.1 per cent from the 1,649 sales in August. But sales tend to peak in spring and can often fall in September. CREA's figures, which seek to account for those seasonal variations, suggest that on an adjusted basis there were the equivalent of 1,903 sales in Greater Vancouver in September, compared with 1,827 in August, a rise of 4.2 per cent.
Still, September's numbers show that Finance Minister Jim Flaherty's July mortgage insurance rule changes are cooling the market, with sales continuing to trend lower than year-ago levels, CREA chief economist Gregory Klump said in an interview.
While that suggests that last month's sales were perhaps not as dire as some people were anticipating, it still shows that the mortgage insurance rule changes that Jim Flaherty announced in July are cooling the market, with sales continuing to trend lower than year-ago levels, CREA chief economist Gregory Klump said in an interview.
"The recent mortgage insurance changes are working, it is cooling the market and sales have ratcheted down compared to a year ago," he said. "We do anticipate that sales are going to remain below year-ago levels for the rest of the year and maybe even into the spring."
On a seasonally-adjusted basis, September's sales were higher than August in about 60 per cent of the Canadian markets from which CREA gathers data, including Calgary, Edmonton, Greater Toronto and Quebec City, the association said.
The national average price for homes sold in September was $355,777, up 1.1 per cent from a year ago. Excluding Vancouver the average price of a house sold rose 3.4 per cent.
The MLS Home Price Index, which seeks to present a more apples-to-apples comparison of prices and to account for any changes in the mix of sales, rose 3.9 per cent year-over-year, CREA said. "This was the fifth time in as many months that the year-over-year gain shrank, and marks the slowest rate of increase since May 2011," it said.
"The Canadian housing market has clearly lost some of its lustre," Toronto-Dominion Bank economist Francis Fong wrote in a research note after the data was released. "Sales have fallen from their peaks in most markets across the country with today's gain only partially offsetting August's substantial decline."
The 2.5 per cent month-over-month rebound in seasonally-adjusted sales in September follows a 6.2 per cent decline in August (that figure was downwardly revised) .
"That being said, with interest rates remaining sufficiently accommodative, we do not anticipate any precipitous decline in housing activity in the near term," Mr. Fong said. "Rather, we expect a gradual unwinding of the imbalance in both sales and prices over the next few years. Moreover, the bulk of the correction will be concentrated in markets we feel are particularly overvalued, such as Toronto and Vancouver."
Mr. Fong also noted that listings have rebounded, rising by 6.5 per cent after significant declines in the previous two months. "The sales-to-new-listings ratio remained well-entrenched in balanced market conditions at 0.49," he wrote.
"Bottom line is still that the market balance is shifting in the buyer's favour," added economists at Bank of Montreal.
BMO's economistsEconomists at Bank of Montreal added that part of the reason the month-over-month data appear more positive is that there were 20 weekdays this September, compared with 22 in September 2011.
"That 9 per cent drop alone accounts for a big chunk of the year-on-year decline," they said in a research note. "Still, while the underlying trend in sales is likely not as dire as the headline yearly drop would suggest, there is little doubt that sales have taken a step back in recent months." September marked the second full month under stricter mortgage rules that took effect July 9 and in the past three months combined sales are down about 7 per cent from year-ago levels, compared with a rise of nearly 5 per cent year-over-year in the first six months of the year."