In another show of strength by the Canadian Housing Market, figures released by CREA for September show an increase in sales activity.
Sales for the month of September increased by 2.7%, compared to August nationally- driven by heavy activity in regional pockets like Toronto, although many regional market reported strong sales in September.
This latest monthly increase represents the highest levels seen since Jim Flaherty’s mortgage restrictions took root earlier this year.
Buyers must qualify for 5-year rates despite the attractiveness of lower 2 and 3 year rates.”
“The government is trying to protect the new homeowner but in many ways it is simply forcing them to buy a home a certain way. Also, by adding the step of CMHC approval for those with less than 20% down, the government is not only increasing debt load (via additional insurance fees) but tightening the purse strings of the lenders themselves. All of this ensures that only the very secure mortgages are getting through. There is little risk when an investor is forced to put 30-35% down on an investment property. “
“Upon default, the banks are sure to realize all their funds, even if the property is sold for under-market value. Many X and Y generation first time buyers are waiting till they have 20% down (often a gift from previous generations) in order to avoid CMHC. This further ensures security for the lender and, of course, lowers the mortgage payment for the buyer. The time delay doesn’t seem to bother this generation as they are happy at home with boomer parents (something the boomer parents weren’t comfortable with in their day).”
“ There is some concern that homes are decreasing in value in some areas and for those trying to sell and move up, the challenge is daunting as not enough equity has been created to qualify for a mortgage on a larger property. For those trying to get out of difficult mortgages, it simply means that a sale is satisfying the banks but leaving them with which to start over. In many cases, they turn to short-term rental until funds for another down payment is realized. Although disheartening, it does ensure those mortgages are not written off. And, of course, for the buyer of those properties, lower prices mean a better chance for them to realize increased equity faster.
The Canadian housing market though, is continuing to remain solid, despite strong headwinds blowing from outside the country.
“The Canadian housing market remains a bright spot against a backdrop of mixed headline news about the global economy,” said Gary Morse, CREA President. “Low mortgage rates continue to draw buyers to the housing market, while recently tightened mortgage regulations are working as intended. That said, housing market trends often diverge from national trends due to local factors, so buyers and sellers should talk to a local REALTOR® to understand housing market trends at play where they live.”
New listings rose month over month, in several major markets including Toronto, Montreal, Ottawa, Oakville and Vancouver. This offset declines in Edmonton and the Fraser Valley, among other markets.
The market, nationally, seems fairly well rooted in balanced territory. The national sales-to-new listings ratio, was 52.8 % in September, up from 51.6 % in August. This ratio is considered a measure of market balance.
Number of months inventory stayed fairly flat; average prices for homes sold in September came in at just below $352,600. While this is up year-over-year, it is the smallest year-over-year increase seen since January.
“Canada’s housing market remains stable amid continuing financial market volatility, contributing to Canadians’ confidence in the economy and providing support for Canadian economic growth,” said Gregory Klump, CREA’s Chief Economist. “Interest rates are expected to remain low for longer, and evidence suggests that recent changes to mortgage regulations are preventing the kind of excesses they were designed to avert. Both of these developments are good news for the housing market.”