According to statistics released by the Canadian Real Estate Association (CREA), national home sales fell 14.5 per cent from December 2017, which recorded the highest monthly level on record, to January 2018. Although activity declined to the lowest monthly level in three years, January’s home sales were on par with the 10-year monthly average.
Home sales activity in January dropped in three-quarters of all local markets in Canada, including virtually all major urban centres. Many of the larger sales declines were posted in Greater Golden Horseshoe (GGH) markets, where sales had sped up late last year following the announcement of tighter mortgage rules coming into effect in January.
Actual (not seasonally adjusted) home sales activity dipped 2.4 per cent compared to January 2017 and was close to the 10-year average for the month of January. Sales were below year-ago levels in about half of all local markets, led by the GGH region. In contrast, sales were up on a year-over-year basis in the Lower Mainland of British Columbia and Vancouver Island, the Okanagan Region, Edmonton, Montreal, Greater Moncton and Halifax-Dartmouth.
“The piling on of yet more mortgage rule changes that took effect starting New Year’s Day has created homebuyer uncertainty and confusion,” said Andrew Peck, CREA president, in a press release. “At the same time, the changes do nothing to address government concerns about home prices that stem from an ongoing supply shortage in major markets like Vancouver and Toronto. Unless these supply shortages are addressed, concerns will persist.”
“The decline in January sales provides clear evidence that the strength in activity late last year reflected a pull-forward of transactions, as rational homebuyers hurried to purchase before mortgage rules changed in 2018,” added Gregory Klump, CREA’s chief economist. “At the same time, a large decline in new listings prevented market balance from shifting in favour of homebuyers.”
The number of newly listed homes declined 21.6 per cent from December 2017 to January 2018, to reach the lowest level since the spring of 2009. New supply was down in about 85 per cent of all local markets, led by the GTA. Large percentage declines were also reported in the Lower Mainland of British Columbia and Vancouver Island, the Okanagan Region, Hamilton-Burlington, Oakville-Milton, Kitchener-Waterloo, London and St. Thomas, Kingston and Ottawa.
With the number of new listings falling more than sales, the national sales-to-new listings ratio tightened to 63.6 per cent in January, compared to the mid-to-high 50 per cent range which has been holding since May 2017. However, this ratio may not necessarily indicate the market has become imbalanced, as market balance measures that are within one standard deviation of the long-term average are generally consistent with balanced market conditions.
Based on a comparison of the sales-to-new listings ratio with its long-term average, just over half of all local markets were balanced in January 2018. The ratio in many markets moved one standard deviation or more above its long-term average in January due to large declines in new housing supply.
The number of months of inventory represents how long it would take to liquidate current inventories at the current rate of sales activity. There were five months of inventory at the end of January 2018, which is close to the long-term average of 5.2 months.
The Aggregate Composite MLS Home Price Index climbed 7.7 per cent year-over-year in January 2018, representing the ninth consecutive deceleration in year-over-year gains. It was also the smallest year-over-year increase since December 2015.
This deceleration in annual price gains largely reflects trends among GGH housing markets. While prices in the region have stabilized for the most part in recent months, ongoing deceleration in year-over-year comparisons reflects the rapid increase in prices one year ago.
Apartment units again logged the largest year-over-year price gains in January, climbing 20.1 per cent, followed by townhouse/row units, which saw prices climb 12.3 per cent. One-storey single-family homes and two-storey single-family homes saw smaller gains (4.3 per cent and 2.3 per cent, respectively).
Benchmark home prices in January were up compared to year-ago levels in nine of the 13 markets tracked by the MLS Home Price Index. Greater Vancouver saw prices climb 16.6 per cent year-over-year, while Fraser Valley’s prices jumped 22.4 per cent over the same period. Apartment units have been driving this regional trend recently, as single-family home prices have stabilized.
In Victoria, benchmark home prices rose by about 14 per cent on an annual basis, and by about 20 per cent elsewhere on Vancouver Island. These gains are similar to those recorded during Q4-2017.
Meanwhile, price gains have slowed considerably on an annual basis in the GTA (+5.2 per cent), Guelph (+10.9 per cent) and Oakville-Milton (-1.2 per cent), although home prices in the former two markets remain above year-ago levels. Monthly prices in these markets have shown signs of stabilizing in recent months after rapidly increasing in early 2017 and subsequently slowing.
In Calgary, Regina and Saskatoon, benchmark home prices fell slightly (-0.5 per cent, -4.9 per cent and -4.1 per cent, respectively). However, Ottawa and Greater Montreal saw increases led by prices of two-storey single-family homes (+7.2 per cent and +5.2 per cent, respectively), while home prices in Greater Moncton increased by 7.5 per cent, led by an increase in one-storey single-family home prices.
The actual (not seasonally adjusted) national average price for homes sold in January 2018 was just above $481,500, up 2.3 per cent year-over-year. When removing data from Greater Vancouver and Greater Toronto, two of the country’s most active and expensive housing markets, the national average price drops to $374,000.