Reports

When seasonal effects are removed, the Composite price index edged up in September, recovering some of the ground lost in previous months. While this applies in particular to Toronto, it is not the case for Vancouver and Calgary, where the seasonally adjusted indices extended a string of declines (left chart). This downtrend in home prices is consistent with the weakness in home sales reported by the respective real estate boards of these two metropolitan areas. At the opposite, seasonally adjusted indices extended a string of solid increases over the last few months in Montreal and Ottawa-Gatineau (right chart). Again, this is consistent with the performance of the home resale market. In Montreal, home sales in September were up 8% from a year ago and at their highest level for a month of September in 9 years. In Ottawa-Gatineau, the market is almost in the “favorable to sellers” territory judging from the new-listings-to-sales ratio.

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October 2018

OPINION: The published Composite index rose in August for a fifth month in a row, but these rises
only reflect usual seasonal patterns over this time of the year. Indeed, after seasonal
adjustment, the Composite index was actually flat in August after drops in June and July.
So, at the national level, the national market is certainly not displaying underlying
strength. This is mostly a reflection of Toronto and Vancouver, the two most important
real estate markets in Canada. The published index for Toronto showed a fifth monthly
increase in a row, but its seasonally adjusted counterpart displayed the opposite with
five consecutive declines. In Vancouver, the seasonally adjusted index was down for a
third month in a row (left chart). In August, seasonally adjusted indices declined or were
flat in six of the nine other metropolitan regions covered. That being said, there are
areas displaying underlying strength, such as Montreal and Ottawa-Gatineau, whose
indices recorded a string of unusually large increases over the past few months

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September 2018

OPINION: The Composite index rose in July for a fourth month in a row, but these rises were all
below the historical average for these months. Indeed, after seasonal adjustment, the
Composite index was flat in July after a drop in June. The same phenomenon applied to
the Toronto index, where at the opposite of the published index, the adjusted index
declined over the last four months (left chart). The adjusted index declined over the last
two months in Vancouver. This means that the recent rises in these indices reflected
only seasonal pressures, not an underlying trend. For Toronto, the recent declines in the
seasonally adjusted index were due to the sub-index for dwellings other than condos,
down a cumulative 2.1%. Meanwhile, the condo index was up 1.6% (right chart). These
numbers are consistent with market conditions, tighter for condos than for other
housing.

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August 2018 (more…)

OPINION: With June’s rise, the Composite Index just recovered the ground lost during H2 2017 (left
chart). Does this mean that the Canadian home resale market is about to enter into a
new frenzy? No. June’s rise in the index, impressive at first sight, was in fact weak for
this time of the year. Indeed, if the Index were purged from seasonal patterns, it would
have been about flat over the last three months (right chart). This means that apart from
seasonal patterns, the index merely stabilized lately. That being said, stabilization at a
high level might hide different price trends for different types of dwellings. Condo prices
have risen at a fast clip since the beginning of the year in Toronto and Vancouver (after
seasonal adjustment, 7.8% and 16.3% annualized respectively), while prices for other types
of dwellings held their ground. The resiliency of prices for the latter category of dwellings
is indeed reassuring in view of higher interest rates and stricter mortgage qualification
rules (B20) that dampen demand for the most expensive categories of dwellings.

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June 2018

OPINION: May’s rise in the Teranet-National Bank HPI confirmed the stabilization of home prices that took place since the end of last year, following a correction in H2 2017 (top chart). It is true that this stabilization was accompanied by a shift of price momentum in favor of condos in Toronto and Vancouver. Given the high price level for other types of dwellings in these cities, rising interest rates and tighter mortgage underwriting standards, this shift should not be surprising.  But fortunately, it did not result in an outright price decline for other types of dwellings in these cities (middle chart). In other regions covered by the Composite index, prices have regained most of the ground lost in Q1 (bottom chart). Given that interest rates are likely to continue to increase, a relapse of home prices over the next few quarters cannot be ruled out. But their resilience so far suggests that price declines would then be limited in scope.

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May 2018