A closely watched Canadian home price index has taken off again following three consecutive months of slower price appreciation.
The latest reading of the Teranet-National Bank Home Price Index showed national home prices rose 0.5 percent in February from the month before, with four local markets — Halifax, Hamilton, Vancouver and Quebec City — posting particularly strong monthly gains.
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While home prices continued to increase between November and January, their rate of growth was declining on a monthly basis. February’s index reading, published today, is higher than January’s 0.3 percent monthly gain, so this indicates that home price appreciation is accelerating again.
Other local markets that saw monthly gains in February were Montreal, Victoria, Calgary and Toronto, with each market recording a modest increase between 0.4 percent and 0.5 percent. Meanwhile, Winnipeg’s local index was flat, while Edmonton and Ottawa-Gatineau posted relatively small monthly declines.
It was a different story when looking at annual index price growth. All 11 local markets that make up the composite index recorded annual increases, with Ottawa-Gatineau, Halifax, Hamilton, Montreal and Toronto all recording double-digit gains between 10 percent and 19 percent.
You may be thinking, ‘All I’ve been reading for months is how home prices have been soaring. What was this slowdown they’re talking about?’ Teranet and National Bank use a different methodology than the Canadian Real Estate Association (CREA) and local real estate boards when compiling their home price index. Because of this, the index is known to lag sales and price activity that’s picked up quicker in the monthly reports published by the realtor boards.
Its repeat sales methodology works by tracking the price change between the two most recent sales of the same property. The index uses prices entered into public land registries in the Canadian markets it tracks. These often are slower to respond to market changes because sale price data is not added to land registries as quickly as it’s entered into the MLS systems used by realtor boards.
In commentary that accompanied the data, National Bank Economist Daren King noted that February’s index rise “is consistent with the increase in the number of home sales over the last several months” reported by CREA.
King said that the number of sales pairs used to compile the 11 local indexes was higher than a year ago for the sixth month in a row. Considering the Canadian housing market has been hotter than ever in early 2021, it’s likely that this will be captured by Teranet and National Bank in the months ahead with the index trending higher.