Slight gains are being witnessed in the Canadian housing market for the first time since August – and they could be a sign that real estate is slowly starting to recover from CMHC’s mortgage rule change bomb earlier this summer.
Housing market activity was up 2.5 per cent from August to September – a partial recovery from the 6.2 per cent dip that occurred as a result of affordability-limiting mortgage rule changes that shut many buyers out of the market.
Improvement Seen Nationwide
In fact, this upswing has been seen in 60 per cent of Canada’s markets, including the Greater Toronto Area, Vancouver and Edmonton. In a posted release Wayne Moen, president of the CREA, points to the varied nature of real estate in Canada. “New mortgage rules continue to keep a lid on national sales activity,” he states. “That said, national figures mask diverging trends in different markets, with activity down in some places while sales elsewhere remain strong. As always, all real estate is local, so buyers and sellers should talk to their REALTOR® to understand how the housing market is shaping up where they live or might like to.”
The Big Picture
While small steps are being taken toward improvement and balancing markets, the overall market has dropped a full 15.1 per cent in activity from 2011 levels. Gregory Klump, chief economist at CREA, says the slowdown is likely attributed to mortgage rules that shut many first time buyers out of the market.
“In the shadow of the latest mortgage rule changes, activity has ratcheted down from higher levels seen during the fourth quarter last year. While some first time home buyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do.”
Those rule changes limited amortizations for CMHC-insured mortgages to 25 years, and capped loan-to-value amounts for HELOCs.
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An Influx of Inventory
The number of units changing hands has also seen a marginal increase this year, with 366,353 total sales so far – up 1 per cent from 2011. While this has decreased the amount of backed up inventory from 6.6 months to 6.4 from August to September, it’s also being countered by a flood of new listings on the market. The current sales-to-listings ratio of 49 per cent points to two thirds of Canada’s market centres experiencing balanced conditions, with the average home price of $355,772 – an increase of 1.1 per cent from last year. Keep in mind, though, that this is skewed downward due to dramatically fewer sales in the Vancouver market – take the west coast city out of the equation, and that’s actually an increase of 3.4 per cent, reflected in 70 per cent of markets.