Resale market rebounds in January

OTTAWA – The resale housing market continued its ongoing strong performance in January as sales gained a slight 0.5% from December while jumping 8% on a year-over-year basis, according to the latest figures from the Canadian Real Estate Association (CREA). However, new listing retreated 4.9%.

The realtors’ group said the number of homes trading hands through its Multiple Listing Service (MLS) reached their highest level since late 2009.

Local markets were almost equally split between those where sales were up and those where sales were down. As has been common in recent months, sales increases were found in the Greater Toronto Area (GTA) and the Lower Mainland of British Columbia. Declines were most notable in Calgary, Edmonton and the Okanagan Region.

“Single family home buyers in the GTA and Lower Mainland of British Columbia had been expected to bring forward their purchase decisions before tightened mortgage regulations take effect in February 2016,” CREA president Pauline Aunger said.

“If listings in these and nearby markets were not in such short supply, January sales activity would likely have reached even greater heights. Meanwhile, other major urban housing markets have an ample supply of listings, particularly where some home buyers have become increasingly cautious amid an uncertain job market outlook,” she continued.

“January 2016 picked up where 2015 left off, with single family homes in the GTA and Greater Vancouver in short supply amid strong demand standing in contrast to sidelined home buyers and ample supply in a number of Alberta housing markets,” CREA chief economist Gregory Klump added. “Tighter mortgage regulations that take effect in February may shrink the pool of prospective home buyers who qualify for mortgage financing and cause national sales activity to ease in the months ahead.”

Actual (not seasonally adjusted) sales activity rose 8% on a year-over-year basis in January 2016 and stood 2.6% above the 10-year average for the month of January. Activity was up in roughly two-thirds of all local markets. B.C.’s Lower Mainland and the GTA again contributed most to the national increase.

The number of newly listed homes fell by 4.9% in January compared to December which more than reversed monthly gains that were posted in the final two months of 2015. Canada’s largest housing markets contributed to the decline including the Lower Mainland, Calgary, Edmonton, the GTA, Hamilton-Burlington, Ottawa and Montreal.

The actual national average price for homes sold in January 2016 was $470,297 – up17.0% on a year-over-year basis.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s most active and expensive housing markets. Excluding these two housing markets from the calculations, the average falls to $338,392 and the year-over-year gain is reduced to 8%.

Even then, the gain reflects a tug of war between strong average price gains in housing markets around the GTA and the Lower Mainland versus flat or declining average prices elsewhere in Canada. If B.C. and Ontario are excluded, the average price slips to an even lower $286,911 – which is a small decline of 0.3% year-over-year.

“While we continue to believe that things just can’t any hotter, markets in B.C. and Ontario continue to prove us wrong,” Diana Petramala of TD Economics said in a research note.

She acknowledged that while some of the demand in January could be attributed to buyers pulling sales forward to get around the new mortgage regulations that went into effect yesterday, she also believes they will only have a “marginal” impact on the market overall as the year progresses.

“As we head into 2016, the combination of weaker economic conditions, tighter financial market conditions and a number of regulatory changes are likely to outweigh the low interest rate environment across most markets in Canada,” Petramala said, adding this weakness is going to be most noticeable ion the commodity-driven economies of Alberta and Saskatchewan.

Meanwhile, Toronto and Vancouver will seemingly benefit from foreign investment in their markets as positive net interprovincial migration flows.

“However, every month of double-digit home price growth raises the risk of a deeper home price correction down the road,” Petramala emphasised. “With more balanced market conditions elsewhere, overall home price growth in Canada is expected to ease to just 2.6% this year, before falling modestly next.”