December’s 1.8 per cent decline marked the third straight monthly drop for Canadian home sales since October, according to data released yesterday by the Canadian Real Estate Association (CREA).
Meanwhile, house prices have remained resilient through a year marked by fluctuating sales numbers, rising 10.4 per cent year-over-year in December. Sales also made a solid 12.9 per cent gain over December 2012’s total.
Not long after CREA released its December housing numbers Canada’s major banks chimed in with their own interpretations of the new data.
Writing for TD Economics, Diana Petramala attributed December’s decline to brutally cold weather that hit some markets through the month. She also identified higher mortgage rates as impacting the demand for housing, especially among first-time homebuyers.
“Going forward, a continued increase in longer term interest rates will offset improving economic conditions, helping to keep home sales stable in 2014 and 2015,” she wrote.
Overall, sales activity was largely in line with TD’s expectation of a soft landing for the Canadian housing market.
In a brief research note titled “Canadian Housing: Steady As She Goes,” BMO’s Senior Economist Robert Kavcic called 2013 “decidedly balanced overall” despite international attention for the housing market’s perceived frothiness.
Kavcic acknowledged that price growth had accelerated in the past six months, particularly in Vancouver and Toronto, but said rising interest rates and balanced conditions should put a damper on gains in 2014.
“It’s hard to find evidence to suggest anything but a soft landing for the Canadian housing market in 2013,” he wrote.
Robert Hogue of RBC Economics characterized the continued sales slump as “payback for the surprisingly strong rally that took place last summer.”
He went on to call the easing in activity as “another healthy development for Canada’s market.”
Resales will continue to rise at a very slow rate through 2014 and the year will begin strongly and finish “on a softer note.” Hogue expects that softening demand and growth in the supply of newly completed condos would constrain price increases in 2014 with home prices increasing by 1.5 per cent nationally.
“Although the risk of a downturn in the national market cannot be entirely dismissed this year, we judge that it is limited because we expect that homebuyer demand will continue to be supported by positive employment trends, steady population growth and still-historically-low levels of interest rates,” Hogue concluded.