Photo: Martin Cathrae/Flickr
Home sales across Canada made headlines yesterday when the Canadian Real Estate Association (CREA) released statistics showing yet another monthly record had been broken.
Articles like these, including BuzzBuzzHome’s, are driven by more or less the same underlying narrative: buyers in Canada are snatching up properties at a rate never seen before.
But beyond that, other real estate stories are unfolding from coast to coast, and commentary from some of the nation’s biggest banks, released in response to CREA’s numbers, sheds light on them. Here are a few of the highlights.
The Grits’ mortgage rule change might actually be working
On a chilly day this past February, more than few Canadians gave a frigid reception to new, Liberal-backed mortgage rules taking effect that month.
Many had their doubts that a measure increasing downpayments on homes priced between $500,000 and $1 million could cool hot markets in Toronto and Vancouver. But according to TD, that might be precisely what’s happening.
“(CREA’s) report suggests that the implementation of higher required down-payments for insured mortgages, which took effect February 15th, had some impact on the Toronto and Vancouver markets,” writes Diana Petramala, an economist with the bank.
“Activity was down/flat in both for the second consecutive month suggesting that a soft-landing may be in store for these red-hot markets,” she explains, noting, “Nationally, the effect of the new rules appears to be more than offset by low interest rates.”
A “Puzzling pullback in listings”
One statistic from the CREA release in particular had economists over at RBC flummoxed: a pullback in available home listings in Toronto and Vancouver, which is making its mark on a national level.
“We find this trend quite puzzling because rapidly rising prices (usually a sign of a highly liquid market) typically attract more sellers,” admits Robert Hogue, one of the bank’s senior economist.
According to a bemused Hogue, it’s not a matter of not enough new-construction homes hitting the market, citing increases in the two cities since early last year. So what is it, then?
“One possible explanation may be that the current tightness in Vancouver and Toronto is a reflection of a strong presence of first-time buyers—since these buyers add to only one side of the buying/selling equation,” considers Hogue.
“However, this explanation would fly in the face of the notion that poor affordability is an obstacle to homeownership in Vancouver and Toronto,” he adds.
Well, with the release of the latest data CREA floated its own idea: homeowners are anxious about selling their homes because that would mean having to jump into a fiercely competitive market to find another. Can you blame them?
These markets beyond Toronto are incredibly tight
A housing market is typically considered balanced if the sales-to-new listings ratio (that’s sales divided by new listings) falls somewhere in the ballpark of 40 to 60 per cent.
Anything higher enters a seller’s market, a lower ratio hints at one where buyers have an edge.
Well, in Hamilton last month the ratio was soaring at 83 per cent, BMO notes, making the Toronto market — it’s now above 75 per cent — seem friendlier to househunters.
It’s not the only market outside Toronto that’s lighting up, either, as one major realtor recently touched on as well: Outlying Kitchener-Waterloo had a sales-to-new listing ratio of 77 per cent last month, BMO cites.
The epic rise of Niagara-Fort Erie real estate
So Ontario is home to a number of hot housing markets. In recent years, Niagara-Fort Erie has not been one of them, but this appears to be changing, Robert Kavcic, a BMO economist, highlights.
“Niagara-Fort Erie looks as hot as it has been in at least 25 years,” notes Kavcic.
“Pretty much all new listings are being absorbed within the month, sales are running at record levels after a 10-year downward grind through early-2015, and average prices have jumped 20 per cent year-over-year in the four months through April,” he adds.