Photo: James Bombales

Canadian home sales were up for a seventh straight month, as prices rose along with them and mortgage rates stayed low. Overall it was a decent September for the Canadian housing market that didn’t knock anyone’s socks off, but continued to look like the return to form many experts have been anticipating.

The September home sales and price data, released by the Canadian Real Estate Association on Tuesday, contained what has become a standard blend of recovery and persistent weakness in major markets.

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Home sales in Ontario, in the words of TD economist Rishi Sondhi, “took a breather” last month when compared to August’s results. That said, the gain over the September 2018 sales total was far more impressive and Sondhi believes economic fundamentals in the form of strong population growth and a healthy labour market will support better results going forward.

Out west, results were more uneven, with home sales declining in both Calgary and Edmonton following stronger activity earlier in the year. Alberta’s lacklustre market has long been a fixture of these monthly data releases ever since housing demand dried up in early 2015 following the oil price collapse.

But for a stronger showing, one simply needed to look farther west to British Columbia where sales notched an impressive 4.7 percent gain driven by a recovering Vancouver market. TD’s Sondhi says low mortgage rates and an encouraging jobs picture are to thank for that.

While Sondhi was tempered in his assessment of September’s performance and overall market outlook, RBC senior economist Robert Hogue went a few steps further, titling a section of his commentary on the CREA release “Soft landing is over and done — it’s flight time again.”

Hogue also points to the federal election as a “wildcard” in projecting housing performance in the coming year as both the Liberal and Conservative parties have made promises to help homebuyers and boost housing demand.

So depending on who you talk to, the outlook for the Canadian housing market is strong or at least quite solid with the strong labour markets, low mortgage rates and population growth all playing a role in getting the market humming again. What could possibly go wrong?

First up is RBC’s Hogue with a stark reminder that, while the Canadian government cooled the market down over the years with its stricter mortgage stress testing rules and shortened maximum amortization periods, it could just as easily overheat it through demand boosting policies.

“Proposed measures such as an expansion of the first-time homebuyer incentive, an extension of the maximum amortization period for insured mortgages, an easing of the mortgage stress test or an increase in the homebuyer tax credit ultimately would boost demand at a time when supply is tight overall,” Hogue writes.

“We’ll be awaiting details and the timing of any housing-related announcements by the next government to gauge the full impact on the market, and whether these will raise the risk of overheating.”

TD’s Sondhi also hedges his bets when predicting further home sale and price gains in the coming months with a reminder that a lot of this strength is highly dependent on there being “no significant deterioration in labour markets.” At a time when recession talk keeps bubbling up to the surface, can strong labour markets really be assumed?

Add BMO senior economist Robert Kavcic to the mix. In a note published yesterday, he flags a mortgage market that has had “all the juice we see squeezed out.” With low mortgage rates having less of an impact on market activity, it would be demographic (read: population growth) and job market trends really driving future strength and, as we know, the latter is anything but a sure thing.

As Hogue makes clear, the federal election will likely be the event to watch this fall to determine where the Canadian housing market heads next.

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