Photo: James Paolo/Flickr
The mixed numbers coming out of the February data released by the Canadian Real Estate Association (CREA) inspired mixed commentary from the country’s leading economists as well.
According to CREA, sales and price growth in February was very much a big city story: the Aggregate Composite MLS Home Price Index in the Greater Toronto Area saw year-over-year sales price growth of 7.84 per cent, followed by Greater Vancouver, which experienced a 6.38 per cent rise.
The actual national average price for homes sold in February was $431,812, up 6.3 per cent from last year. But if you take out Toronto and Vancouver, the average sales price was $326,910, a 1.5 per cent rise over 2014.
In the words of Robert Kavcic, Senior Economist at the Bank of Montreal (BMO), Canadian housing was “up, down and all around”: Prairie cities saw sales and price growth stall or drop, and markets such as Ottawa, Montreal, and Victoria experienced modest increases or none at all, while the prices in the most expensive markets kept climbing.
Here’s how the big banks interpreted the numbers:
Alberta and Oil
- Noting that Calgary sales have dropped 40 per cent in just the latest four months on a seasonally adjusted basis, Kavcic pointed out that in Alberta the months’ supply of homes for sale jumped 6 per cent from just over 3 per cent more recently, “hinting at more price weakness to come.”
- Diana Petramala of TD Economics also mentioned the dropping sales in Calgary and Edmonton (average existing home sales were down year-over-year by 34.5 per cent and 16.7 per cent, respectively). What does that mean going forward? “Average existing home prices in commodity driven markets, such as Alberta, Saskatchewan and Newfoundland, are likely to weaken further as the year progresses.”
- Though RBC did predict further price declines in Alberta and Saskatchewan going into 2015, the bank did find something to be cautiously optimistic about. In February, new listings dropped 9.9 per cent month-over-month in Calgary. Robert Hogue, Senior Economist, stated “it is encouraging to see possible signs that the worse may soon be over in Calgary and Saskatchewan. In particular, we point to the drop in new listings in these markets as a positive development that, if sustained, would suggest to us that panic is not setting in and that activity may be close to reaching a floor.”
Toronto and Vancouver
- Kavcic said “the associated reduction in interest rates has only helped juice Toronto prices further” though the jump in prices appears to be more related to detached homes in the GTA. Similarly, Vancouver’s sales price growth was “juiced by the drop in mortgage rates and very favourable February weather” with detached houses also leading price index growth.
- Petramala also noted low interest rates have helped keep activity in Vancouver and Toronto brisk, suggesting that “with both markets relatively tight, home price gains, especially for single-family homes, will likely maintain some momentum over the next few months.”
- Over at RBC, Hogue called Vancouver and Toronto “strong, yet not overly ‘hot’.”
The future of the market
- Kavcic made fewer predictions than the other economists. However, he did note that the “healthy distribution of price gains”, excluding the outliers in the 26 cities across Canada studied by CREA, “leaves little for the bears (who think the market is cracking) or bubble mongers (who think unsustainable price growth is rampant across the country) to chew on.”
- Meanwhile, TD Economics “continues to forecast a moderation in the Canadian existing home market, with sales likely to remain relatively flat in 2015 and 2016 and existing home price growth expected to decelerate to a 1 to 2 per cent year-over-year pace.” In turn, that means no new Bank of Canada rate cuts.
- Over at RBC, the prediction was for a 3.4 per cent rise in home prices in 2015, “which would constitute a slowing of the pace compared to 4.6% in 2014.”