Canada's housing market remains well-balanced with cooling home sales and new listings adjusting to historical trends. "The hangover from accelerated home purchases earlier this year is expected to persist over the rest of the year, but positive economic and job market trends bode well for home price stability," said Gregory Klump, CREA chief economist.
The outlook for the Canadian economy, while having changed slightly due to recent uneven developments in the global economic landscape and south of the border, remains solid and is expected to continue lending support to the housing sector.
While monetary policy measures undertaken since April have modestly tightened financial conditions in Canada, they remain "exceptionally stimulative." According to Georges Pahud, CREA president, "The Bank of Canada recognizes that inflation remains well contained and that economic growth will soften, so interest rates will rise slowly and at a measured pace, which will keep home financing within reach for many home buyers."
According to the central bank's statement, "Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook." However, some economists believe that this may not be the last hike this year. In the mean time, Canada's recovery will proceed slowly.
Housing Market
Home Sales
Resale housing activity improved in August, totaling 32,807 units and is up 4.1% from the previous month. This is the first monthly increase since March of 2010. Activity was up most in Ontario and British Columbia, with monthly gains in these two provinces accounting for most of the improvement in national sales activity in August.
Average Home Price
The national home price averaged $324,928 in August, which is on par with the same month last year. Average prices rose or were stable in more than two-thirds of all markets on a year-over-year basis. Average price trends are expected to remain stable as supply and demand continues to move the market further into balanced territory.
Inventory
Sales-to-Listings Ratio
The market continues to hold its ground in a balanced territory as seen by the sales-to-new listings ratios, which have remained well within 40%-60% for five consecutive months. This bodes well for home price stability as the new supply of homes continues to adjust to lower demand, resulting from accelerated home purchases earlier this year.
Mortgage Rates
Average for: 25-Year Amortization, 5-Year Term
The Bank of Canada raised its target overnight rate by one quarter of one percentage point to 1% on September 8, marking its third consecutive quarter point hike. Mortgage rates stayed put at 5.39% for the month of September. This was down 0.1% from a year earlier and was also 0.1% below where it stood at the beginning of the year. Despite further expected increases, interest rates remained well below the historical average.
Sources: Conference Board, The Canadian Real Estate Association (CREA), Royal Bank of Canada, Canadian Mortgage and Housing Corporation, Bank of Canada
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