OPINION: In Vancouver, after seven large monthly house price increases in a row, prices were virtually flat in September (top chart). This is consistent with the recent loosening in the home resale market, as sales dropped each month since their record level last February for a cumulative decline of 44% (middle chart). Prices in Vancouver have not fell so far because market conditions have just started to loosen from the tightest conditions on records. We see home price deflation starting soon (10% expected over twelve months). Toronto is now the red hot market. Home sales broke records in each of the last three months. But the historically low supply (in terms of the number of homes listed for sale) is also contributing to market conditions that are the tightest on records (bottom chart). With such a combination of high demand and low supply, monthly house price growth surged to 2.9% on average over the last four months. While the latest measure (maximum debt-service-to-income ratio for insured 5-year fixed-rate mortgage tested against posted mortgage rate) might reduce demand, the low supply still argues against a significant price decline in the Queen City.

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