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Free AccessMNI Analysis:Cdn Nov Home Resales +3.9% Ahead of New Mtg Rules
--CREA Revises Down 2018 Sales Forecasts
By Yali N'Diaye
OTTAWA (MNI) - Existing home sales impressed with a fourth consecutive
increase in November, as they rose 3.9% from October, led by a 16% surge in the
Greater Toronto Area, The Canadian Real Estate Association reported Thursday.
Price gains, however, further slowed, with the Aggregate Composite MLS
Housing Price Index down 0.2% on the month and up 9.3% year-over-year, the
smallest 12-month gain since February 2016, mostly as a result of weakening
price growth in the Greater Golden Horseshoe housing markets, especially the
single-family segment.
The actual unadjusted national average price rose 2.9% year-over-year to
C$504,000, with a 1.9% decrease in Greater Toronto contrasting with a 14.7% gain
in Greater Vancouver.
Tighter underwriting rules will apply to mortgage borrowers starting in
January, which might have precipitated purchases at the end of this year.
"Some home buyers with more than a twenty percent down payment may be
fast-tracking their purchase decision in order to beat the tougher mortgage
qualifications test coming into effect next year," said CREA President Andrew
Peck, adding, however, that "evidence of this is mixed".
CREA Chief Economist Gregory Klump added, "It remains to be seen whether
stronger momentum now will mean weaker activity early next year once new
mortgage regulations take effect beginning on New Years day."
In the Greater Toronto Area (GTA), which explained two-thirds of November's
sales increase, CREA noted a "large" increase of new supply, helping boost
national listings, which were up 3.5% in November.
As sales and listings increased at a similar pace, the sales-to-new
listings ratio was little changed at 56.4%, up 0.2 percentage points from
October, and still within the 40% to 60% range reflecting balanced conditions.
The number of months of inventory ticked down to 4.8 in November from 4.9
in October.
The Bank of Canada has been expecting a slowdown in the housing market as a
result of higher interest rates and tighter macro prudential regulations, noting
in its December 6 policy statement that "housing has continued to moderate, as
expected" in its October economic outlook.
However, housing starts surged in November, when the trend reached its
highest level in almost 10 years, mainly as a result of higher construction in
multiple units in Toronto.
So it will be interesting to see how the central bank interprets the
current housing momentum and to which extent it attributes it to buyers acting
earlier in anticipation of tighter rules from January.
CREA's forecasts released Thursday support the BOC's view of a housing
slowdown despite the current pickup in activity that could be related to
potential homebuyers moving forward their purchases ahead of January's tighter
mortgage rules that will submit even borrowers with a 20% down payment to
stringent stress tests.
"The 'pull-forward' of these sales may come at the expense of sales in the
first half of 2018," CREA said in its report.
"Meanwhile, other potential homebuyers are anticipated to stay on the
sidelines as they save up a larger down payment before purchasing and
contributing to a modest improvement in sales activity in the second half of
2018," it added. As a result, CREA revised down its sales forecasts for 2018,
when they are expected to fall 5.3%, largely due to weaker activity in Ontario.
The national average price is expected to decline 1.4% in 2018.
--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com
[TOPICS: MACDS$,M$C$$$]
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.