Friday, September 20, 2013

Pop Go the Home Sales...For Now

By: Douglas Porter, BMO Chief Economist
TORONTO 2013-09-16

Canadian existing home sales rose a seasonally-adjusted 2.8 per cent in August, and are now up a meaty 11.1 per cent from year-ago levels. Sales were a snick below our expectations due to weakness in Quebec and some Atlantic cities, but the lead story here of course is the double-digit gain in sales and the impressive price increase. There are two important factors that help explain the showy year-on-year sales gain: 1) it’s an easy comparison, as year-ago sales were at a low ebb following the new mortgage insurance rules, and 2) summer sales were no doubt juiced by potential buyers jumping in with pre-approved mortgages before rates went higher. Still, suffice it to say that next to no one predicted a big mid-year bounce in home sales at the start of 2013, when calls for Canadian housing market calamity were all the rage. Contrary to the Greek chorus of woe, sales are now above their 10-year average in seasonally adjusted terms.

And, the year-ago comparisons will remain quite easy for the next 8 months, so settle in for a spell of potentially solid yr/yr figures even if sales do simmer down notably in coming months. While the sales figures have been up and down like a yo-yo over the past year, prices just keep quietly churning ahead. The national average transaction price was up 8.1 per cent y/y, though this measure has been skewed higher by the unusual fact that the five most expensive markets in the country just happened to see the five biggest yr/yr sales increases last month. (In order of price: Vancouver, Toronto, Fraser Valley, Victoria, and Calgary.) Note that the 26-city median city price was up 4.1 per cent y/y, and the more representative MLS HPI was up 2.9 per cent y/y, to a record high. Of the 26 largest cities, 23 reported a single-digit rise over the past year.
The big event has been the snap-back in sales activity in Vancouver, a market that was all but written off by the housing bears. Sales are now up a massive 53.1 per cent y/y and closing in on the 10-year average. But even with that nifty recovery, Canada-wide sales for all of 2013 look on track to dip slightly from last year’s level. Only 6 of the 26 cities reported sales increases for the first 8 months of the year (including Vancouver), led by a 10.5 per cent rise in Calgary.

BMO Economics report:
  • Sales are now above their 10-year average in seasonally adjusted terms
  • The national average transaction price was up 8.1 per cent year over year, though this measure has been skewed higher by the unusual fact that the five most expensive markets in the country experienced the five biggest year-over-year sales increases last month
  • Regionally, the big event has been the snap-back in sales activity in Vancouver – sales are now up a massive 53.1 per cent year over year. 
  • “Even with that nifty recovery, Canada-wide sales for all of 2013 look on track to dip slightly from last year’s level,” stated Doug Porter, Chief Economist, BMO Capital Markets.  “Only six of the 26 cities reported sales increases for the first 8 months of the year – including Vancouver – led by a 10.5 per cent rise in Calgary.”
BMO Housing survey:
  • 68 per cent of Canadian home owners say they are aware of their home’s market value within a few thousand dollars, four-in-ten (38 per cent) feel their home is worth more
  • First Time Buyers: Report shows first-time buyers more likely to enter a bidding war than the average buyer

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