The 2nd Quarter of the 2018 year has now passed and the overseeing body for real estate in Canada, the Canadian Real Estate Association, has released it’s 2nd quarter report. It indicates that housing market fundamentals continue to be strong in many parts of the country but that several housing markets continue face adversity due to policy headwinds.
Understanding the temperature taken for the housing market nationwide is of course going to be of great importance for all realtors, but in particular for new agents who understand the value in having a grasp of the big picture for the business – and the profession of serving it – in the country. There is of course a correlation between these statistics and a realtor’s ability to generate new business. Here at Real Estate Leads, our online real estate lead generation system is highly recommended for new realtors looking to get more out of their efforts in this regard.
Back to the report; The new mortgage stress test introduced last October was expected to result in homebuyers rushing to purchase homes in advance of the new rules coming into effect in January. This was then expected to create a ‘pulling forward’ of sales activity that would then result in fewer transactions occurring during first half of 2018.
However, that hasn’t been the case. Seasonally adjusted national home sales last December having surged to the highest level ever recorded before dropping considerably by the time early 2018 had arrived. Actual national sales figures represent ones that are not seasonally adjusted, and these ones for March, April and May are usually among the most active months for any given year.
Delayed Response
It’s interesting to note then that combined sales fell to a nine-year low for this three-month period in Canada for 2018. This trend indicates sales momentum has not yet begun to rally as many expected it to. Consider as well that interest rates are expected to rise further this year and in 2019. Home sales activity is still expected to strengthen modestly in the second half of 2018 though, as housing market uncertainty decreases moving forward.
With these factors taken into account, the national sales forecast has been revised downward with a projected decline of 11% working out to some 459,900 housing units this year. This decrease is powered primarily by weaker sales in B.C. and Ontario and resulting from heightened housing market uncertainty, ongoing supply shortages, provincial policy measures, high prices for detached homes, and then the aforementioned new mortgage stress test.
The national average home price is projected to go down to $499,100 this year, and that is not much of a departure from the CREA’s previous forecasting of a decline of 2.1% from 2017. However, only in Newfoundland and Labrador are average prices expected to dip that significantly, while more than half of all provinces can expect to see increases. The national average price reduction also incorporates fewer numbers of transactions in and Ontario and B.C.
The average price decline predicted for Ontario is -1.7%, and that is largely a reflection of fewer higher-priced home sales in Toronto. This is especially relevant during the important spring market, which typically exhibits seasonal jumps in the average price that this year failed to materialize. This seasonal pattern is expected to resume in 2019, but the increase to the annual figure from the spring push hasn’t been observed this year.
Eastern Canada Rises
Contrasting to all of this is the way that home prices in Eastern Ontario, Quebec, New Brunswick, P.E.I. and Nova Scotia are expected to continue moving up in response to increasingly firm market conditions seen over recent years. Not surprisingly, British Columbia is now forecast to see its average price rise in 2018 as well, with prices in the province being more resilient than than had been expected previously.
- Alberta home prices should dip down by 1%
- Saskatchewan is predicted to decrease by 1.5%
- Newfoundland and Labrador is predicted to decreased by 2.9%, with supply remaining elevated in relation to demand as it has been for years
In 2019, the forecast for national sales is that they should rebound modestly to 474,800 units but remain below annual levels seen from 2014 to 2017. The anticipated partial recovery in sales for the second half of this year from deferred purchases made from January to June in Ontario and B.C. is subsequently expected to diminish through 2019. The consensus is that this is because interest rates will continue to rise. This trend is also predicted to occur in other provinces, but be most significantly seen in Ontario and B.C. Transactions in these two provinces have dropped sharply over the first half of 2018, and this occurred even though housing demand seems to be buoyed by relative economics and demographics.
Further, the national average price is also predicted to bounce back to $518,300 in 2019, and this is seen to be in response to an expected return to normal seasonal patterns for spring sales activity and prices in Ontario housing markets. It’s good to see that the MLS® Home Price Index is rising in prominent urban centres in B.C. and Ontario.
Market balance also continues to firm in Quebec, Nova Scotia, New Brunswick, and Prince Edward Island. Added price increases, albeit modest ones, are expected to be seen in these provinces, but with rising interest rates holding price gains in check. Prices in Alberta, Saskatchewan, Manitoba and Newfoundland and Labrador should remain relatively stable from this year to the next.
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