Surge of the summer to downhill winter

 

The big difference between September and today is that buyers no longer have access to the record low 2.89% 5-year fixed rate holds. Rates jumped in June, putting a hard deadline to those all-time low 90-120 day rate holds set to expiry by mid October. Buyers would otherwise have to look to re-negotiated rates at 3.39% or higher, attributing to significant interest cost increases over the term of their mortgage. Many buyers therefore acted on their rate holds, contributing to a surge in the sales. Vancouver notable saw a 64% and 37.8% increase in sales in September and October over their 2012 months. Across Canada sales were up 18.2% in September, but dropped 3.2% in October, the biggest drop in more than a year. The prospect of low interest rates to remain around for a longer period has eased the pressure on current buyers. Most of the economist predictions forecast a cooling in both sales and housing prices over 2014, however, most note that the numbers from November and December will give a clearer picture of where the market stands. With interest rates expected to remain low well into 2015, the short-term variable rate is expected to see some improved traction over the coming months.

CREA released a good 2-minute video capturing the overview of the market up to October.

https://youtu.be/AtN5sREu_d4?list=PLOKoTy8yPzZZsZYmlX4yDXAIaSMVVU7Zr

More highlights from October and November headlines:

OVERALL

• CMHC: Canadian housing starts rose more than expected in September.
• The seasonally adjusted annualized rate of housing starts was 193,600 units last month, up from an upwardly revised 184,000 in August and surpassing analysts’ expectations for 185,000.
• Canada’s new home price index rose 0.1% in August from July on gains in Calgary, trailing the median forecast in an economist survey, the government statistics agency said.
• Ottawa home prices registered the first annual drop since January 1998, falling 0.2%.
• “While the momentum for sales activity began improving a few months ago, it may be losing steam after having only just climbed back in line with an average of the past 10 years,” he added.
• CREA: 1.4% fewer newly listed homes in September compared with August. While the Canadian housing market has tightened it continues to remain balanced.
• CREA: Home sales were up 18.2% across Canada in September, year over year, driven largely by buying sprees in Vancouver, Toronto, Calgary and Edmonton. And while last month’s sales were up 18.2% compared with September 2012, CREA says that was because last year’s figures were unusually weak.
• “Year-over-year increases in the sales over the past couple of months highlights how activity softened across much of the country following the introduction of tighter mortgage rules last summer,” said Gregory Klump, CREA’s chief economist.
• The average price of homes sold in September in Canada was $385,906, up 8.8 per cent from the same month in 2012. But, that number was also driven up by an unexpected increase in interest rates, starting last May, contributing to a significant spike in sales in major markets such as Toronto, Vancouver and Calgary. Those cities saw a surge in buyers, armed with 90- and 120-day commitments for mortgages as low as 2.89%, frantically trying to jump into the market before their low rates ran out and they were forced to renegotiate at rates that, today, are almost a full percentage point higher.
• BOC: it won’t be raising rates — its neutral stance could even mean lower rates — consumers can safely slide back into variable mortgages tied to prime which tracks the central bank rate.
• “Housing has been the big driver,” says Jim Murphy, head of the Canadian Association of Accredited Mortgage Professional. “If you slow the housing market, what’s going to take its place in terms of the domestic economy? It turns out it’s not the export sector, and now they’re predicting lower growth. If we keep slowing housing and slowing housing, will that just make things worse overall?” “What we’re missing is rising rates,” Mr. Murphy said. “Rising rates would solve the problem.“ That is the opinion of Bank of Nova Scotia CEO Rick Waugh, who spoke out last month saying that if policy-makers are concerned about house prices then the Bank of Canada should raise interest rates. Rather, the central bank decided to remove its bias towards

higher rates as it worries about sluggish exports and continuing struggles in Europe

• Flaherty said that it would be his department’s responsibility to act on housing prices since the Bank of Canada has “basically no room to move,” but added: “I have no intention of interfering in the market for the time being.”
• Central bank removed any reference to raising interest rates, saying the economy has too much slack and inflation is too low.
• “If it were not for the concerns about household imbalances, the BoC would have cut its policy rate at last week’s [policy] meeting,” says Nomura Securities economist Charles St-Arnaud.
• CREA: Canadian home sales posted a small month-over-month increase in September as the national average sale price rose but the number of new listings declined.
• Sales improved on a month-over-month basis in just over half of all local markets, with gains in Greater Vancouver and Greater Toronto offsetting declines in Calgary and Montreal.
• About 340,980 homes have traded hands across the country so far this year, or 1.8% below levels recorded in the first three quarters of 2012.
• CMHC: Seasonally adjusted annualized rate of housing starts was 198,282 units in October, up from an upwardly revised 195,929 in September and surpassing analysts’ expectations for 190,800
• Vancouver shows the country’s most expensive market is rebounding, even if prices haven’t followed.  Calgary also reported an 18% increase in October sales from a year ago.

“Written off for dead last year, Vancouver’s housing market (one of the priciest in the world) has made a startling comeback,” said Sal Guatieri, an economist with Bank of Montreal.

• Canadian existing home sales fell 3.2% in October from the previous month, the biggest drop in more than a year, as the prospect of lower-for-longer interest rates eases pressure on buyers. “Now that interest rates appear to be going nowhere fast, sales activity in the near term may be held in check by homebuyers who are in less of a hurry to purchase,” said Gregory Klump, the real estate association’s chief economist.
• Sales in Vancouver fell 10.1% in October from a month earlier, while sales in Toronto were down 4.9%.
• Sales activity and prices suggest Canada’s housing market has cooled after a strong spring and summer.
• Teranet-National Bank Composite House Price Index:

Economists are divided over whether the market has achieved a soft landing after years of roaring ahead, or if it will still undergo a sharp price correction similar to the U.S. housing crash. Mortgage rates remain near historic lows and are not expected to rise much as long as official interest rates are held low to stimulate the economy.

• Teranet data showed prices rose in October from September in just 3 of the 11 metropolitan markets surveyed, with a 1.1% rise in Vancouver, a 1.0% rise in Halifax and a 0.9% rise in Calgary. Compared with October 2012, prices were 6.7% higher in Calgary, 4.6% higher in Hamilton, 4.1% higher in Toronto, 3.8% higher in Quebec City, 2.7% higher in Vancouver, 2.2% higher in Edmonton, 2.0% higher in Winnipeg, and 0.9% higher in Montreal and Ottawa.
• CREA: Home sales through its MLS system in October were up 8.3% compared with a year ago, but down 3.2% compared with September. CREA chief economist Gregory Klump says the month-over-month dip in sales was evidence that sales in the late summer and early fall were boosted by homebuyers with pre-approved mortgages jumping in the market before rates headed higher.
• CREA: The national average price for a home sold in October was $391,820, up 8.5% compared with a year ago. However, the association says if Toronto, Vancouver and Calgary are excluded from the calculation, the average price was up 4.9% compared with a year ago.
• Doug Porter, chief economist with BMO Capital Markets, said there are two notable splits developing in Canada’ housing market - larger cities are hot, while smaller cities are generally not, and sales in the West are strong, but are weakening in much of the East.
• Poloz used the testimony to pointedly disagree with a couple of forecasting organizations that weighed in this week on the Canadian situation — the Fitch Rating service that judged Canada’s housing market as 21% overpriced, and an OECD recommendation that he start raising interest rates in a year’s time. “Our judgment is (the housing market) is a situation that is improving, this is not a bubble that exists here that would have to be corrected,” he said. “If there is a disturbance from outside our country that’s another analysis.”

Poloz said most of the fundamentals surrounding the housing market appear headed in the right direction. The prospects for the economy is improving, he noted, which should create more jobs.

“It looks expensive,” he said of home prices. “But which markets are expensive? Well those markets have been expensive my whole life,” he said, noting that Toronto and Vancouver both absorb high rates of immigration.

• Fitch Ratings: home prices have surged more than 130 per cent since 2001, outpacing income growth by more than 80 per cent.
• RBC’s latest research on the portion of average household income needed to maintain a home shows that affordability deteriorated over the summer, the second consecutive drop in as many quarters. RBC chief economist Craig Wright attributed the deterioration in affordability to higher prices and what has been a tightening mortgage market reacting to an expectation of firming interest rates.
• The federal government is imposing a "risk fee" on CMHC for new issuances of high-risk mortgages starting next year — a fresh indication that Finance Minister Jim Flaherty is unhappy with the risk to taxpayers posed by Canada's hot housing market. The fees of 3.25% applied to the Canada Mortgage and Housing Corp. on new premiums written, as well as a charge of 10 basis points on new portfolio insurance, is expected to cost the housing agency about $50 million a year. However, officials said that at present there are no plans to pass on the costs to Canadians obtaining mortgage insurance.

PREDICTIONS

• Even with slower price growth and month-to-month volatility in the condo apartment market, overall annual price growth has been well above the rate of inflation this year. This scenario will continue to play out through the remainder of 2013,” said Jason Mercer, TREB’s senior manager of market analysis, in the release.
• Economists and others who follow the real estate industry suggest the last three months of the year will be key for determining which way home sales and prices are going because pre-approved mortgages at low rates locked in for 120 days, should have run their course by now.
• Expect house sales — and prices — to cool down over the next few months, and maybe even years, as this summer’s surge of buyers armed with the lowest mortgage-rate commitments ever peters out, housing watchers say
• Brace for a significant slowdown, warns Capital Economics economist David Madani in a note analyzing the September numbers. “Home sales are getting pulled forward at the expense of later this year and next, as potential homebuyers jump into the market before mortgage rates rise any further. Accordingly, we expect home sales to flop in the not-so-distant future, which will once again apply downward pressure on house prices.” In fact, the rise in prices also can be attributed to high demand at the same time that fewer homes are being listed for sale across the country, says Madani.
• Bank of Montreal senior economist Robert Kavcic believes that the market has simply returned to historic norms and that homeowners — and buyers — won’t see anywhere near the price jumps of the last decade. He’s not expecting a correction in prices but, rather, annual gains of just 2 per cent in 2014 and below the 3 to 4 per cent annual income growth anticipated the next few years. “Any worry about a hard landing in Canadian housing has quickly become a faint memory.”
• Queen’s University real estate professor John Andrew expects to see sales taper off through November and into next year, but doesn’t anticipate a drop in prices, at least for low-rise houses.

He remains most concerned about the condo market, especially in Toronto where a record number of newly built units will hit the market in 2014. “I’m concerned still that there’s been a lot of overbuilding, but my biggest worry is what’s going to happen when all these mortgages come up for renewal in a few years, and at significantly higher rates.”

• “It’s possible interest rates will go down,” said CIBC deputy chief economist Benjamin Tal, adding there’s a huge amount of mortgage debt already in the pipeline that was created when people took advantage of rates they were pre-approved for in the summer. “I’ve seen what is in the pipeline in mortgage activity and you won’t believe the numbers when it is official.” “If we don’t get the softness we are expecting [in housing], quite frankly I think they are already talking about more restrictions,” said Mr. Tal, adding that would be the only option to slow the housing market if Ottawa is reluctant to raise rates.
• House prices for Calgary’s resale market are expected to rise the most in the short-term, according to the Conference Board of Canada.
• And if the finance department continues to make it harder for first-time buyers to get into the market, “it will cause some issues that may have a longer-term impact,“ said Royal Bank of Canada economist Robert Hogue.
• It will take at least two more months of housing data to properly assess whether the market’s rebound is temporary or has legs. “They really have to wait at least until November or December,” said Canadian Imperial Bank of Commerce economist Benjamin Tal.
• Canada’s federal housing agency has bumped up its forecast for housing starts in 2013 but trimmed its forecast for 2014, setting an essentially flat outlook for a once-roaring market. The Canada Mortgage and Housing Corp said on Thursday housing starts will be in a range of 179,300 to 190,600 units in 2013, with a point forecast, or most likely outcome, of 185,000. That is up from its August estimate of 182,800.

The agency said there will be 163,700 to 205,700 units started in 2014, with a point forecast of 184,700. That is down from CMHC’s August estimate of 186,600.

CMHC said existing home sales will range from 439,400 to 474,000 in 2013, with a point forecast of 456,700 units. That’s up slightly from August’s forecast of 448,900 units and about equal with the 454,005 sales in 2012. For 2014, it expects a move up to a range of 438,300 to 498,100, with an increase in the point forecast to 468,200. That’s up slightly from August’s forecast of 467,600.

• Price gains are expected to slow in 2013 and 2014. CMHC’s point forecast for the average price calls for a 4.0% gain to $378,000 in 2013, and a 1.9% gain to $385,200 in 2014.
• “With the BOC keeping rates low for a long period of time, I would suspect that we’ll see a significant trend away from longer-term fixed into shorter-term variable rates,” said Toronto broker Calum Ross.
• Last week, the Bank of Canada said it expects the output gap — the difference between potential and actual activity — to close by late 2015, when it also sees inflation, now at 1.1%, reaching the 2% target.
• A London-based group is now predicting construction output, led by housing, is set to grow by about 4% over the next year, despite the fact the industry faces labour shortages and financing concerns.
• The Calgary Housing Market Outlook by Canada Mortgage and Housing Corp., said starts will dip to 11,700 units in 2013 before increasing to 13,100 in 2014. By the end of 2013, existing home sales in Calgary are forecast to reach 29,200 units, up 10% from 26,634 in 2012. In 2014, job creation and net migration will continue to be key drivers of the resale market, said the report. Employment growth in 2014 will remain strong for the fourth consecutive year, while migration will be coming off a record high in 2013. MLS residential sales are forecast to increase 2.7 per cent in 2014 to 30,000 units. The average MLS residential price in Calgary is forecast to finish at $436,500 in 2013, up 5.9 per cent from $412,315 in 2012. Price growth should moderate to 2.4 per cent in 2014, with an average price of $447,000
• Flaherty told reporters in Toronto that people “should anticipate over the long term, interest rates will go up regardless of what central banks do now.”
• The present population of the greater Vancouver area is estimated at about 2.3 million and this is expected to increase by almost 50% to 3.4 million by 2041.
• “For as long as the Bank of Canada remains on the sidelines – which we now expect until H2-2015 – the risk of an adverse development in Canadian housing is limited,” Mazen Issa, a Canada macro strategist at TD Securities, said in a research note. “Taken in tandem with the fading impact of tighter mortgage regulations, the outlook for housing over the near-term is expected to remain benign.”
• Asked to put odds on his soft landing scenario, Poloz said he would place it in the 60-to-80% probability range. On the overall economic outlook, Poloz said he believes the global economy is “healing” and that Canadian growth will start picking up next year as the U.S. recovery intensifies.
• CMHC predicts that housing price growth could actually slow to just 1.5% in 2014, while incomes should climb by about 2 per cent.
• Fitch Rating: forecasted that home prices across the country are in for a “soft landing” and will either flatten out or slightly decrease over the next five years. It estimates that current prices are overvalued by up to 26% in some regions and could fall by as much as 10% in some places.
• IMF report: forecasts that Canada’s economy as a whole will start benefiting next year from a pickup in the U.S. economy, leading to greater demand for Canadian exports and renewed business investment.
• Vancouver: The new home industry can expect 2014 to be a “real grind” as impending municipal elections in Metro Vancouver could slow down the rate of approval for new housing projects, Vancouver real estate guru Michael Ferreira said. “I think those on council and those people seeking reelection will be loathe to make any kind of controversial decision (on new housing),” said Ferreira, who is a principal of the Vancouver company Urban Analytics.

VANCOUVER

• If you compare the market to a year ago, the recovery is spectacular. September Vancouver sales climbed 63.8% from a year ago. Compare those same 2,483 September sales to a month earlier and they are down 1.2%.
• “While sales are up considerably from last year, it’s important to note that September 2012 sales were among the lowest we’ve seen in nearly three decades,” said, Sandra Wyant, president of the Real Estate Board of Greater Vancouver, in a statement.  “Home sale and listing activity this September were in line with the 10-year average for the month.”
• September sales in British Columbia’s largest city were 1% below the 10-year average for the month. New listings for the month were also 3.5% below the 10-year average.
• The total number of properties currently listed for sale in Greater Vancouver in September was 16,115, a 12.2% drop a year before but a 0.5% increase from August.
• Home prices have not fluctuated much in our market this year,” Ms. Wyant said. The board’s composite benchmark price for all residential properties in Greater Vancouver was $601,900, a 0.7% decline from a year ago but a 2.3% increase since January, 2013.
• Ferreira said 4,253 units had been sold in Metro so far this year, compared to 2,546 to the same date in 2012. Bright spots included Richmond, with 878 concrete condos sold this year, and the Tri-cities (Coquitlam, Port Coquitlam, Port Moody), with nearly 500 concrete condos sold to date, a 74% increase over last year
• However, Metro’s wood-frame condominium sales were “not quite as good,” with 1,832 sold so far in 2013, compared to 2,502 to the same date in 2012. Townhomes showed a similar trend.
• REBGV: 2,661 sales through Multiple Listing Service in October, 2013, a 37.8% jump from a year ago. Sales were up 7.2% from the 2,483 transactions a month earlier. However, the rebound still places sales activity 2.8% above the 10-year average for October while new listings were 1.9% below the 10-year average for the month.
• New listings are dropping quickly with the 4,323 new homes listed in October, down 14.2% from September. There were 15,257 properties listed through the whole MLS system last month, a 12.2% decline from a year ago and a 5.3% drop from September.
• While sales showed a considerable gain from October, 2012, the rebound was not quite as strong as in recent months. September, for example, saw Greater Vancouver sales bounce 64-per-cent higher than the corresponding month in 2012. In August, Greater Vancouver sales were 53 per cent above the lacklustre month of August, 2012.

“Today’s activity is helping to keep us in balanced market territory,” said board president Sandra Wyant, “which means that prices tend to experience minimal fluctuation.”

• “We’ve had a great summer and good early fall, but it’s important to remind everyone of the context, said Fraser Valley Board president Ron Todson. “The last four months of 2012 were amongst the slowest for our real estate market in the last 15 years.”

TORONTO

• Existing homes sales in the Greater Toronto Area rose 30% in September from a year ago and a strong third quarter has the market about even with 2012 now.
• TREB: 7,411 sales through the Multiple Listing Service in September, up from 5,687 sales a year ago. It was also up from the 6,249 in sales in August. For the first nine months of the year, sales are now down 1% compared with the same period in 2012
• The average sale price last month also climbed 6.5% from a year ago to $533,797. That’s also up from $503,094 from August. Over the first nine months of the year, the average selling price was $520,118, a 4% jump from 2012.
• TREB: For the first 14 days of October, 3,460 sales through the multiple listing service, up 21% from a year ago. The mid-month numbers are also 13% above the 10-year average. “With October mid-month sales well above the 10-year average, it seems clear that we have more than recovered from the temporary dip in residential transactions that resulted from the onset of stricter mortgage lending guidelines,” said Dianne Usher, president of the board, in a release.

Prices also continue to climb with the average home selling for $536,301 during that 14-day period, a 7.3% increase from the same period a year earlier. “Price growth has been stronger in the second half of 2013, as sales growth has outstripped growth in listings. There have been more buyers competing for available properties compared to the first half of the year, which has led to increased upward pressure on average selling prices,” said Jason Mercer, the board’s senior manager of market analysis, in a release.

• RealNet Canada Inc.: 2,356 sales across the Greater Toronto area in September, a 4.4% increase from a year ago — the second straight month year over year sales have climbed. “It’s a reversal of the declining trend from January-July, 2013,” said George Carras, president of RealNet. However, year to date, 2013 sales remain 31% off the 10-year average and are well below 2012 levels. “It’s the lowest level seen in the last decade and lower than during the global financial crisis,” said Mr. Carras.
• Low rise sales have been dragging total sales down and year to date are off 39% from a year ago, compared to 22% for high-rise sales. The weak number for low rise sales has been chalked up to provincial land use policies which restrict development. RealNet says the availability of condos has pushed the price gap between high-rise homes and low-rise homes to an all-time high. The average low-rise home is now worth $658,869, compared to $432,853 for a high-rise property.
• “This chart is like watching your dog run away on the Prairies,” said Mr. Carras, about the $226,016 gap between the two style of houses. “The prices of homes we are making less of, low rise, have increased, while high-rise homes are decreasing.”
• For the condo dweller, not only are home prices dropping the size of their home has on average shrunk 1.7% from a year ago.
• Sales in the Greater Toronto Area jumped more than 19% in October from a year ago. The Toronto Real Estate Board reported there were 8,000 sales last month, up from 6,713 a year ago. Prices also continue to be strong. The average sale price in the GTA was $539,058 in October, up 7.4% from a year ago.
• The average age of first-time buyers across the GTA is 37 — a number that’s remained surprisingly constant over the last decade as house prices have virtually doubled — and the bulk of millennials are just 20 to 36 right now.
• In 2012, echo boomers accounted for 15% of the growth in demand for housing across the GTA, but that’s expected to double to 30 per cent by 2021, says CMHC regional economist Ted Tsiakopoulos.

CALGARY

• CREB: total MLS sales in the city of 1,923 during the month were up 19.44% from a year ago.
• The average sale price rose by 8.27 per cent to $454,352 while the median price was up 8.78 per cent to $402,500.
• Calvin Buss, involved in real estate marketing and sales, said job creation and in-migration are fuelling the current market.
• In September, there were 2,796 new listings in the Calgary market, up 4.33% from a year ago but active listings at the end of the month were down by 23.08% to 3,922.
• The pace of year-over-year sales growth in the resale condo market is much higher than the single-family home market this year in Calgary.
• MLS sales in the condo apartment category in the city were 3,253, up 14.58% from the same period a year ago and the average sale price has jumped by 6.14% to $298,050. In the condo townhouse category, sales of 2,600 are up 22.18% from last year and the average sale price has risen by 6.60% to $338,809.
• The single-family home market in the city has seen sales rise by 7.36% to 13,482 with the average price moving up by 8.18% to $517,730.
• “Steady migration, employment and population growth are major contributors as we move into the fourth quarter of the year. The relative affordability of our city’s housing market remains one of the best in Canada and we can expect to see Calgary’s condominium market continue to rise at a moderate, sustainable pace.” Kaitlyn Gottlieb, a realtor with Century 21 Bamber Realty Ltd. in Calgary.
• Strong sales so far this year are expected to push the annual sales volume to about 5,000 units, potentially making 2013 the second strongest sales year in the past decade.
• Conference Board of Canada. In a report released, the board forecast short-term year-over-year prices to increase by 7% or more in Calgary — the best in the country. The seasonally-adjusted annual rate of MLS sales in Calgary for September was 31,896, up 15.1% from last year while listings of 42,696 have increased by 2.9%. The average price of $436,776 is up 8.7% from a year ago. The board’s report classified Calgary as a sellers’ market.
• According to the Calgary Real Estate Board, MLS sales of 1,953 for the month were up 17.72% from a year ago as the average sale price rose 5% to $458,876 while the median price saw an increase of 5.96% to $409,000.
• Although new listings for the month were up 9.08% to 2,522, active listings at the end of the month were down 16.19% to 3,841.
• The average days on the market to sell a property dropped from 45 a year ago to 40 in October.
• Moser said housing activity in Calgary may be fuelled by a number of factors: seasonal fall peak activities with people wanting to purchase and move into homes before winter sets in; investor speculators coming into the market due to the flood impact in June; corporations reorganizing and centralizing back to Calgary and Edmonton; and rental rates increasing.
• “Price growth and tighter market conditions have encouraged some of the recent rise in new listings,” said Ann-Marie Lurie, chief economist at the real estate board. “This is a trend worth noting as the rise is easing some of the tightness in the market. Despite some movement, sellers’ market conditions persist. Employment growth, strong net migration, lack of rental product and low mortgage rates have contributed to the rise in housing demand over the past two years,” she said. “Meanwhile, supply levels have not kept pace, causing prices to push up,” added Lurie.
• “The residential real estate market is holding strong for sellers,” said Grace Yan, a Calgary realtor with RE/MAX Real Estate (Central). “It usually slows down for Christmas season but we are realizing that it remains at a steady rise. We are still finding a shortage of listings, lots of activity with shorter days on the market. We are finding from fixer uppers, inner-city properties to turnkey luxury high-end homes in demand. We anticipate the steady market to continue to heat up for the New Year.”
• CREB: the average MLS sale price for all residential property in the city so far this year has been $457,123. The annual record is $428,649 set last year. In 2004, average sale prices in the city were $227,269.
• CREA: its latest MLS data for October showing that Calgary had the best year-over-year gain in the country in the MLS Home Price Index.
• Calgary’s real estate market is showing no signs of slowing down in November. Month-to-date including Thursday, there have been 830 MLS sales in the city, up 34.30% from the same period a year ago, according to CREB. The average sale price has also climbed by 7.47% to $463,126.

TD: Canadian Regional Housing Market Outlook

One of my top “bank” lenders, TD Canada Trust, released their Canadian Regional Housing Market Outlook today.  It’s a great synopsis of the  housing market; reviewing previous conditions, current stats, and what they anticipate for 2014 and 2015. If you’re interested in the real estate market in Canada – it’s worth the read.  Click on the document below to get the full report.

Market Showing Surprising Strength

The housing market has continued to surprise forecasters with prices and sales increasing across the nation. 2013 has been a resilient year; the Canadian Real Estate Board predicts the average sale price will increase to 3.6% this year with another 1.7% in 2014. They are also now forecasting 449,900 sales over the Multiple Listing Service this year, up from the 443,400 figure set in June.

In Vancouver alone, sales increased 52.5% over August 2012; Single family homes increased 69%, condos 40% and townhomes 48%. However, even with this surge in sales the month still remains 4.6% below the 10-year average. Prices are up 2.3% from earlier in the year, but down 1.6% year over year.

In Toronto sales increased 21% from August last year, and surged again to a 29% increase by mid September. Average home prices also gained 5.4%.

Calgary is expected to lead in short-term year-over-year price growth in the housing market. Record breaking luxury home sales continue to push the average sale prices up; August was up 6.3% from July and 26.3% from a year ago.

Predictions are for continued growth, but at a slower pace due to the 30% increase in mortgage rates over the past few weeks.

More highlights from Septembers headlines:

OVERALL

• The Canadian economy grew by 1.7% in 2012 and the bank is estimating 1.8% expansion this year.
• Analysts has been expecting a big number in August but have cautioned that a year ago was a brutal month for housing in most parts of the country.
• The average sale price was up 4.8% on a year-over-year basis, with 80% of the surveyed major markets reporting gains.
• In Toronto, the market has been “unusually hot,” says Aleksandra Oleksak, a sales representative at Sage Real Estate Ltd. This past July was the third-best July on record for home sales. “We really expected a huge slowdown,” Oleksak adds, “and in some pockets of Toronto, you’re still seeing multiple offers and bidding wars.” It’s much of the same in Carbonear, Nfld., says the owner of Dream Realty Ltd., Victoria Harnum, whose annual income is set to exceed what she earned last year mid-way through this year. In Calgary, First Place Realty Ltd. associate Bob Truman can’t get to listings fast enough. “If you are taking a buyer out to look at properties, chances are half of them will be sold before you get there to look at them,” he says.Real estate sales aren’t sizzling in every neighbourhood, of course. Since the job market stalled on Vancouver Island in 2008, anything listed for more than $400,000 can sit on the market for at least two years, says broker Debbie Simmonds of Fast Forward Real Estate. “The industry has been hit very hard here.”
• The housing market’s surprising strength was on full display in the August data released in September, with sales up 11.1 per cent from a year earlier and prices rising more than economists expected. “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,” Bank of Montreal chief economist Doug Porter wrote in a research note. “Contrary to the Greek chorus of woe, sales are now above their 10-year average in seasonally adjusted terms.”
• Prices, too, are defying expectations. “The housing market has proven more resilient in 2013 than we had anticipated,” Toronto-Dominion Bank economist Diana Petramala wrote,“The outperformance has been particularly notable on the price side.”
• The Ottawa-based Canadian Real Estate Association, which represents about 100 boards across the country, has once again upped its forecast for sales in 2013, citing low interest rates and a strong economy. “Sales after a slow start of the year have improved more than we had projected,” said Gregory Klump, chief economist with CREA. “The increase in the discounted mortgage rate has moved forward activity that would have taken place later in the year.”
• CREA is now forecasting 449,900 sales over the Multiple Listing Service this year, up from the 443,400 figure set in June. Before that, CREA had cuts its forecast three times in the face of the protracted sales slump that ensued from the summer of 2012 to this spring, after Ottawa tightened mortgage insurance rules.
• August’s sales were 2.8-per-cent higher than July’s, according to the association.
• Bank of Montreal economist Benjamin Reitzes noted that the year-over-year numbers appear stronger because the market was plunging at this time last year, but said recent sales levels are nevertheless healthy by historical standards.
• Bank of Montreal senior economist Sal Guatieri said in a phone interview Sept. 10. “The market appears to be brushing off the tougher mortgage rules.” A soft landing is when the rate of economic growth slows but remains high enough to prevent a recession.

PREDICTIONS

• Bank of Canada: In its quarterly Monetary Policy Report, released on July 17, the bank said growth would be 2.7% in both 2014 and 2015.
• Bank of Montreal Chief economist Doug Porter says sales are now close to their 10-year average, even with the comeback we’ve seen. “Sales are not running away. They definitely bare watching but they are not in a situation yet where the government needs to step in and take action,” said Mr. Porter. He says the state of the market will probably be better assessed by October, adding a rising rate environment has just taken a little bit of steam out of the market. “I don’t think it has killed the market,” said Mr. Porter. “I think the real story is sales will be flat for the year and nobody predicted that at the beginning of the year, they were heading down for the count,” said Mr. Porter.
• McLister told the Financial Post that CMHC’s stricter cap would amount to roughly 20 basis points or 0.2% percentage points on a five-year mortgage and “won’t have a real dampening effect on credit.”
• The strength of pricier markets such as Vancouver is pulling average prices higher than expected. The CREA expects the national average home price will rise 3.6 per cent this year to $376,300. In 2014, prices are forecast to inch up another 1.7%.
• Benjamin Reitzes: “However, the improvement in activity over the past few months probably won’t be sustained, as mortgage rates have jumped nearly one percentage point which will weigh on activity later this year,” he added.
• “There’s no question that the interest rates of today are sustaining these high prices,” said Bill Binnie, a Vancouver-based broker at Royal LePage, the largest real estate brokerage in Canada by sales, in a Sept. 11 telephone interview. “But we see immigration and the foreign buyers come in, so we have confidence the housing market will be good.” This year’s sales figures across Canada will be better than in 2012, he said.
• “The average price in Calgary is forecast to increase almost six per cent this year to $435,000,” said Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp., about the census metropolitan area. “Part of the gains in the average price thus far is due to the high number of luxury homes sold this year. There has also been more pressure on prices as active listings have moved lower as well as days-on-market. Price growth is expected to continue into 2014 but at a more modest pace.”

VANCOUVER

• The Real Estate Board of Greater Vancouver said they were 2,514 sales via the Multiple Listing Service last month, a 52.5% increase from a year ago.
• To put the Vancouver market in context, last month’s major rebound still leaves sales 4.6% below the 10-year average for the month. August sales were also 14.7% below July figures.
• Prices also showed stability with the benchmark price, the average for typical homes sold across all property types, hit $601,500 in August, which was 1.6 per cent below the same month a year ago, but up 2.3 per cent from the beginning of the year.
• The overall inventory of homes hit 16,027 in August, down 8.8 per cent from the level in August 2012 even though there was an uptick of new listings during the month. August’s sales-to-active-listings ratio of 15.7 per cent
• Real Estate Board of Greater Vancouver results
  • Sales of single-family homes were 1,052 in August, up 69 per cent from the same month a year ago and the benchmark price was $923,700, down two per cent from August 2012.
  • Sales of condo properties were 1,018 in August, up 40 per cent from the same month a year ago and the benchmark price was $366,100, down one per cent from August 2012.
  • Sales of townhouse properties were 444 in August, up 48 per cent compared with the same month a year ago and the benchmark price was $457,000, down one per cent from August 2012.
• “I don’t think there’s going to be blocks of houses on fire,” says Vancouver, B.C.-based McLister. “Nothing’s really convinced people that a crash is imminent.” He cites growing employment and wage stability, near-rock-bottom lending rates and consistent demand from immigrants and first-time buyers as key reasons why the market hasn’t wavered. Affordability, which is heavily dependent on low interest rates and lending flexibility, is almost the same or better than 20 years ago, according to the Bank of Canada’s Housing Affordability Index. Fear, he says, has helped deter people from “doing stupid things.”
• The board’s Home Price Index composite benchmark price for all residential properties was $601,500, a 1.3% decline from a year ago but a 2.3% jump from the beginning of 2013.
• Vancouver is the most expensive city to buy a home nation-wide, with an average cost of about $780,500, higher than in London and New York. The equivalent in Toronto is $523,147, according to the Canadian Real Estate Association. That compares with New York’s $779,000 average in the second quarter and 438,000 pounds ($702,289) in London in July.

TORONTO

• Sales in Toronto, the largest market, rose 21% from August last year to 7,569 units, the Toronto Real Estate Board said in a statement, with average prices gaining 5.4%.
• The average price of a home sold in Toronto was $503,094 in August, the Toronto realtors group said.
• Some of the strongest growth numbers were seen in Toronto’s beleaguered condo sector last month where sales were up 20.1 per cent across the GTA — 21.4 per cent in the City of Toronto — and prices climbed by 3.7 per cent year over year.
• TREB attributed the sales increases to the fact that buyers have now adjusted to the more stringent lending rules, saved up bigger deposits and “have reactivated their search for a home.” But there are other factors at play as well: There is growing confidence, although still considerable wariness, that the market is holding up far better than most observers had expected a year ago.
• House hunters have also grown anxious that prices have only continued to climb while they’ve been watching from the sidelines since last summer.
• House sales skyrocketed by 29 per cent year over year across the GTA as of mid-September, with the highly watched condo sector leading the way, according to figures released by the Toronto Real Estate Board Tuesday.
• Condo sales were up 36 per cent across the GTA – 42.6 per cent in the City of Toronto – with prices up 2.4 per cent over mid-September of 2012, spurred on largely by recent increases in fixed-rate mortgages and buyers rushing to get into the market before 90- and 120-day mortgage pre-approvals expire.
• The average sale price in the City of Toronto now stands at $531,388, down from $534,782 as of mid September of 2012. That compares to $504,909 in the 905 regions, up from $473,031 at this time last year.
• Detached homes across the GTA saw a 27.3 per cent increase in sales and 5.2 per cent climb in prices. Semi-detached home sales were up 29 per cent as of mid September and prices down 2.7 per cent, lead largely by an almost five per cent decline in the City of Toronto.
• Townhome sales climbed almost 30 per cent, while prices were up 9.2 per cent in mid September.
• August new condominium sales in the Greater Toronto area were the worst in a decade and are now 46% below the long-term average, says the Building Industry and Land Development Association.
• Sales along low rises were the third lowest in 10 years and 43% below the long-term average. Land shortages were blamed for the weak sales, a statement BILD said is supported by a price index which saw low rises reached a record of $658,938.

CALGARY

• Calgary’s red-hot housing market was sizzling in August as records were set for the most luxury home sales ever for the month, the highest median and average sale prices for the month and the second highest ever total MLS sales during the month.
• According to the Calgary Real Estate Board, total MLS sales for August of 2,196 in the city were up 27.53 per cent from last year; the average price rose by 8.80 per cent to $453,752; the median price increased by 6.40 per cent to $399,000; new listings were up by 7.39 per cent to 2,774; active listings were down by 24.81 per cent to 3,898; and days on market to sell fell by 17.78 per cent to 37.
• Grace Yan, a realtor with RE/MAX Real Estate (Central) in Calgary, said the real estate market rapidly changes from week to week. “It is currently quite a strong sellers’ market. We are seeing properties go on the market then within a day will be sold with competing offers and at times I have seen properties that have gone competing offers and sold for $100,000 over list price,” she said, adding good properties that are listed at market value are sold quickly. “We are finding that the market is currently buoyant due to the small ratio of listings. We still have quite a few people relocating to Calgary due to a strong job market and strong economy. Prices continue to rise as there is currently high demand and low supply of housing inventory. So when those good properties come on the market they are being snapped up fast.”
• Richard Cho, senior market analyst in Calgary with Canada Mortgage and Housing Corp., said many existing homeowners have taken advantage of the rise in home values by selling their house and using the equity gains towards a luxury home. In addition, rising incomes and relatively low mortgage rates have also helped buyers purchase higher-priced homes,” he said.
• According to the Calgary Real Estate Board, year-to-date for just the city, there have been 17,933 MLS sales, up 9.33 per cent from the same period a year ago. The average sale price has jumped by 6.93 per cent to $456,779 but new listings are down 0.8 per cent to 25,943.
• Calgary and area is forecast to lead the country in short-term year-over-year price growth in the housing market, according to a report released Friday by the Conference Board of Canada. The report said prices in the Calgary region are expected to rise by seven per cent or more. The board’s report said Calgary is now in a sellers’ market.
• The board said the seasonally-adjusted annual rate of sales in Calgary of 33,264 in August was up 6.3 per cent from the previous month and a 26.3 per cent hike from a year ago.
• The pace of luxury home sales outside Calgary are strong this year but not as active as what’s been happening in the city where the market is setting records at a torrid clip.
• “The Calgary luxury home areas such as Britannia, Mount Royal, Elbow Park, Eagle Ridge, Bel Aire, Elboya and the downtown core are considered recession-proof in our opinion being that they are within a 10-minute drive to downtown, are within walking distance to amenities, the arts, cultural and sporting events and empty nesters from the outlying areas always seem to move into the city from acreages once they retire or their children are off to university.”

The Market’s On Fire

August presented us with another defining month for the mortgage industry. Reviewing the month’s previous stats, July proved to be on fire. Sales were up across the country, drastically in the major centres: Vancouver and Toronto were up 40% and 16% year over year respectively. Calgary was a leader in year over year price increase growth and once again broke new records for the luxury home sales with 70 homes sold in the Million+ bracket. Calgary’s momentum has not slowed; the first 19 days of August already surpassed the previous August record of 38 sales, set in 2007.

The heated market is not just affecting the homeowners looking to buy and sell, but rentals are also in high demand. Calgary has the lowest vacancy rates in the country hovering at 1% and Toronto’s high demand has edged rent prices up 4.1% in the second quarter alone.

With the pulse back in the market, there has been yet another government interjection to hold the reins. This time, the mortgage restrictions are targeting the lenders through the control of mortgage insurance lending via Canada Mortgage and Housing Corporation (CMHC).

Earlier this year, CMHC announced an 85 Billion dollar securities cap for 2013, up from 76 Billion the year previous. With just over half of the year complete, 66 Billion has already been allotted, which has lead to a ‘new’ 350 Million monthly securities limit for the Credit Unions, Banks and other mortgage lenders.

Under the Housing Act Mortgage-Backed Securities (NHA MBS) program, banks are able to securitize large portions of their mortgages, enabling them to lend more funds to new homebuyers at lower prices.

This new limitation will now force banks and other lenders to consider other alternatives for managing the risk of mortgage defaults. Instead of being able to pass that risk to the government and taxpayers through CMHC, they will have to look to other private mortgage insurance providers or potentially decide not to take on specific mortgages.

The threat to homebuyers: there may be fewer lenders willing to take your mortgage risk, making it harder to get mortgage approval or obtain best market rates.

It’s estimated that 70% of Canadians are homeowners, and with that, the Bank of Canada is not shy in listing the possibility of a sharp housing fall as the No. 1 domestic risk to the economy. The government is very cautious and acting as overprotective parents over the housing market. Understandably so, with the outcome of 2008, however, there are many organic industry shifts that are naturally encouraging a slow down and balance to the market, including a decrease in land purchases from developers and the selloff in the bond market which has put an upward pressure on mortgage rates. Best 5-year rate is now around 3.69%.

More highlights from August’s headlines:

OVERALL

• “The share of total employment now working in manufacturing has dropped to an all-time low below 10 per cent since the start of the year (now just 9.7 per cent),” BMO economist Douglas Porter noted recently. “That’s down from more than 15 per cent at the start of last decade and barely half the level in the 1970s.” Meanwhile, construction jobs have never been more plentiful. They now account for 7.6 per cent of all jobs in Canada — the highest proportion in records going back to the 1970s, and well above the long-term average of around five per cent.
• CMHC – 17,993 actual starts in July which, extrapolated over 12 months, gives a seasonally adjusted annual rate of 192,853 starts. That was slightly down from June’s adjusted annual rate of 193,797 starts. The agency says the annual rate of urban starts decreased by 2.1% in July to 173,042 units, as both single and multiple urban starts declined.
• Canadian home ownership levels are not tracked as closely as they are in the United States but it is believed we are now close to having 70% of households in an ownership position — an all-time high. We were at 68.4% based on the 2006 census and the percentage is expected to climb the next time data is released.
• RealNet Canada Inc. said residential land investment in Toronto fell 51% in the first six months of the year compared to the same period in 2012. Sales in Greater Vancouver fell 30% and Calgary 52% for the same period.
• Commercial real estate research firm RealNet recorded $329 million worth of commercial land sales in Metro Vancouver over the first four months of 2013, which was down 30 per cent from the $472 million made by developers over the same period of 2012, which was a high point for the region.
• Richard Vilner, research manager in RealNet’s Greater Toronto office added that $329 million was still above Metro Vancouver’s 10-year average for sales of land to developers — the only city among the three it was comparing in its report (Calgary and Toronto were the others) where that was the case.
• The deputy chief economist of CIBC World Markets, Benjamin Tal, said builders curtailing their land purchases shows the market is responding on its own to correct housing imbalances.
• “The combination of steps the government has taken in the last year, coupled with the beginnings of a selloff in the bond market will put a bit of upward pressure on mortgage rates,” said CIBC chief economist Avery Shenfeld.
• Bank of Canada lists the possibility of a sharp housing fall as the No. 1 domestic risk to the economy.
• Canada Mortgage and Housing Corp. has notified mortgage lenders, including banks and credit unions, it will restrict each of them to a maximum of $350 million of new guarantees in August under its National Housing Act Mortgage-Backed Securities program. For lenders who package their mortgage loans and sell them as securities to investors, the CMHC program takes out the risk by guaranteeing payments on the investments, and allows the lenders to use the proceeds as capital for new loans and offer them more cheaply. The federal Crown corporation has given authority to guarantee up to $85 billion under the program, but by the end of July, $66 billion had been committed.
• “We are starting to see the impact of the changes wearing off. Prices in most markets are now rising faster than income,” Petramala, Economist at TD Bank said. “So it makes sense the federal government, CMHC, may want to limit some of the risk-taking in the housing market.”
• Canadian home prices rose in July from June to an all-time high, but the modest monthly gain suggests the robust housing market may be cooling again, according to data from the Teranet-National Bank Composite House Price Index
• The Teranet data showed prices rose in July from June in nine of the 11 metropolitan market surveyed, led by a 2.6% rise in Victoria, a 1.8% rise in Hamilton, a 1.3% gain in Toronto and a 0.8% rise in Edmonton. Prices were up 0.5% in Calgary, 0.3% in Ottawa, Quebec City and Vancouver, and flat in Montreal.
Prices dropped in the month by 0.4% in Winnipeg and 0.6% in Halifax.
• The Canadian Real Estate Association’s report on activity for July showed resales edging up 0.2% from June on a seasonally adjusted basis and up 9.4% from July 2012, when tighter rules put the brakes on lenders and buyers.
• The national average home price was $382,373, 8.4% higher than a year ago, although Gregory Klump, the real estate association’s chief economist, said that was mostly because sales were concentrated in expensive major markets. Excluding sales in Toronto and Vancouver, the national average price would have gone up only half as much and sales volume would have been down from June, the CREA report notes.
• Canada’s dollar depreciated by 1.4% against the U.S. dollar in June following a May decline of 3%. Investors and economists attributed the bond sale to concerns that interest rates will rise as the U.S. Federal Reserve scales back its bond purchases and signs of faster growth in the U.S. and Europe.
• Royal Bank is increasing the rates by 20 basis points, with its fixed five-year closed mortgage rising to 5.34% and its five-year special rate to 3.89% – came a day after the Bank of Montreal raised some of its mortgage rates.
• In the USA – The latest homeownership rate, set to be released today by the Census Bureau, will hit bottom at about 64% in the next year as families leave the foreclosure pipeline and enter rental homes, according to a May analysis by London-based Capital Economics Inc. It’s currently the lowest in almost 18 years after averaging 64% for 30 years through 1995.
• In the USA – The rate is now 4.58%, up from 4.4% the prior week. That is the highest level for the 30-year in more than two years, since it hit 4.6% on July 7, 2011, according to Freddie Mac spokesman Chad Wandler.

PREDICTIONS

• TREB now see prices rising during the rest of 2013 and into 2104.
• “Months of inventory for low-rise homes remains near record lows, suggesting that sellers’ market conditions will remain in place in the second half of 2013. An increase in listings in 2014 would lead to more balanced market conditions and a slower pace of price growth next year, albeit still above the rate of inflation,” said Jason Mercer, senior manager of market analysis.
• The projection calls for the economy to advance by 1.5 per cent, followed by an even softer 1.0 per cent in 2014, as the country’s over-built housing market moves from soft to crash landing. That would likely put Canada behind the U.S., Japan and possibly Germany — among the G7 countries — in terms of growth in at least one of the years.
• Capital Economics analyst David Madani, says, given the under-performance, he expects the Bank of Canada will keep interest rates at current super-low levels until late 2015.
• While the central bank sees growth accelerating in the July-September period this year and continuing into the next two years, Capital Economics predicts the opposite scenario, with the second half of this year squeezing out a mere one-per-cent growth rate. The slow pace extends to 2014, then picks up to two per cent in 2015.
• Madani anticipates the unemployment rate to rise from an average 7.3 per cent this year to 8.0 per cent in 2014. The jobless rate will stabilize somewhat at 7.8 per cent in 2015.
• Poloz said, private sector demand in the U.S. had turned bullish, which should boost demand for Canadian exports of lumber, and machinery and equipment.
• TD economist Diana Petramala, who specializes in the housing market, estimated rates could rise from 20 to 65 basis points, the equivalent of 0.2 to 0.65 of a percentage point. She noted that historically, this is a minor increase. “Affordability will still remain in the housing market,” she said.
• Mazen Issa, Canada Macro Strategist at TD Securities, said the recent rise in mortgage rates will reduce affordability, limiting sales and slowing the rate of price rises over the rest of 2013 and into 2014.
• On one side of the divide you’ve got the real estate community with people like Phil Soper, chief executive of Royal LePage Real Estate Services, saying improved results for sales and prices in July are not all that dramatic by historical standards. Their opponents are the housing naysayers like David Madani of Capital Economics who has been calling for a housing pullback since February 2011 and portrays the recent bump in sales as a last gasp before the market cools for the rest of 2013.
• Nationally, the CMHC’s point forecast is for MLS sales across Canada to decline from 453,372 in 2012 to 448,900 this year and then rise to 467,600 in 2014. The national average sale price is expected to see year-over-year growth of 2.7 per cent this year to $374,800 followed by an increase of 2.1 per cent in 2014 to $382,800.
• According to Benjamin Tal, deputy chief economist at CIBC world markets, the increases are a sign of things to come. “Interest rates are rising for a reason,” he said, attributing the changes to an increasingly healthy U.S. economy, which analysts believe will benefit Canada as well.
• A report, funded by Genworth Canada, the largest private provider of mortgage default insurance in the country, says the sector will avoid a major downturn because of population growth and employment gains which will drive demand and soak up supply.
• Conference Board of Canada doesn’t see prices for condos coming down in any of the eight markets it surveyed. “We don’t think a country wide crash is likely,” it said in its report. Employment will rise moderately while interest rates will inch up slowly, mitigating any disaster.

By market:

• Montréal’s economic growth will remain steady and its aging population will support sales, which will only grow by 1.4% from 2015 to 2017.
• Ottawa will feel the effects of government spending cuts. Unit sales will still increase by 2.5% from 2015 to 2017
• Toronto’s inventory will continue to build up, but population growth is expected to bring builders and buyers back to the market by 2015
• Calgary new condo construction will be hurt by third-quarter flood. It will have the highest growth in starts in resales in 2014. Price growth will be in the 2% to 3.5% range over the next few years.
• Vancouver will stay the most expensive housing market in the country, and make condos an affordable option. It is expected to be a buyer’s market in 2013.

“Over-all, the days of very cheap mortgages are going to be replaced by cheap mortgages.” Avery Shenfeld,  CIBC chief economist

VANCOUVER

• In the Vancouver market, the local real estate board said July sales came in 40.4% ahead of a year ago and were 0.1% above the 10-year average.
• REBGV says its price index for Greater Vancouver is off 2.3% from a year ago but flat from a month ago.
• The index for single family detached homes is up 11.2% over half a decade while apartments have experienced only a 0.2% gain.
• For the Real Estate Board of Greater Vancouver, July was the hottest month of the year so far, and the busiest July since 2009, the board says.
• Sales cleared through the Multiple Listing Service reached 2,946 in July, the board reports. That’s a 40.4 per cent increase compared to the 2,098 sales recorded in July 2012, and an 11.5 per cent increase compared to the 2,642 sales in June 2013.
• The boost in sales, however, doesn’t appear to have put much pressure on pricing.
• In Metro Vancouver, the benchmark price for all homes in the board’s region was $601,900 in July, which is still 2.3 per cent below the benchmark price of this time last year, but an increase of 2.3 per cent over the last six months.
• The average Multiple Listing Service selling price for a single-family home in Greater Vancouver has skyrocketed in the past 30 years – from $130,000 in 1983 to $1.1 million last month.
• Home sales in B.C. soared last month, the highest number for the month of July in eight years, according to the British Columbia Real Estate Association. a total of 7,650 residential sales were recorded on the Multiple Listing Service, up 18 per cent from July of 2012. The average MLS price in the province was $534,360, up 12.5 per cent from July 2012.
• According to a report released earlier this month from the Real Estate Board of Greater Vancouver, July was the hottest month this year for home sales in Vancouver. Sales in the region on the MLS reached 2,946 in July, up 11.5 per cent from the month previous, and up 40.4 per cent from July 2012. In Metro Vancouver, the benchmark price for all homes in the board’s region was $601,900 in July.
• The Real Estate Board of Greater Vancouver says single family detached home prices are up 16.8% over the last five years while apartment prices have risen just 0.2% during the same period.

TORONTO

• The Toronto Real Estate Board said there were 8,544 sales in July 2013, up 16% from a year earlier and the best July since 2009 and third best on record. The board says new listings are rising, but at a slower rate than sales.
• “Despite recent increases in average borrowing costs, home buyers are still finding affordable home ownership options in the greater Toronto area,” said Diane Usher, president of TREB, in a release. “We are a year removed from the onset of stricter mortgage lending guidelines and many households who put their decision to purchase a home on hold have reactivated their search. An increasing number of these households are getting deals done.”
• TREB said the tight market conditions helped push the overall average price in the GTA to $513,246, an 8% increase from a year ago.
• “The low-rise market segment continued to be the driver of overall price growth,” said TREB, noting condominium prices are still rising ahead of inflation. The average condo price rose 3.4% from a year ago.
• Toronto condo research firm Urbanation Inc. released statistics, which shows the market pulling back sharply. The 3,903 number of new condominiums sold in the second quarter, 3,903, was below levels a year earlier. Developers have responded by opening 1,000 less condominiums than in a typical second quarter, the firm said.
• Mr. Vilner, research manager with GTA Commercial Real Estate at RealNet, says only a fraction of land purchased in the last couple of years is now having condos built on it. “There’s still a ton more to come. Builders are slowing down their new developments because of the slowdown in sales,” he says. Another issue is the cost of land has risen steadily. In the GTA, low density land and detached new home products saw a 79% increase in price per acre since 2005. However, low density land values fell 16% over the first six months of this year.
• “It’s a complete inverse out there. A decade ago you had three low-rise choices for one high-rise, now you’ve got three high-rise choices for one low-rise,” says Mr. Carras. High-rise sales are already falling. July sales were 34% below their 10-year average. Yet as of July 31 there are 256 high-rise developments in the GTA with 66,126 units. By the end of 2013, the market will add 17,000 condos.
• New home sales across the GTA hit their lowest level in 10 years in July, yet prices continue to shatter previous records, averaging a new high of $645,854, according to statistics released by the Building Industry and Land Development Association. Just 783 lowrise homes were sold across the GTA in July, 45 per cent below 10-year averages, according to statistics compiled for BILD by RealNet Canada Inc., which has warned repeatedly that affordability is becoming a major deterrent in the single-family home market.
• Rental demand remains unrelenting across the GTA, and especially in the downtown core, with a record 5,315 condo apartments listed for rent via the MLS system in the second quarter of this year, up 20 per cent from the same time last year, according to research firm Urbanation. Even that surge of listings couldn’t keep up with demand — much of it from young professionals — and rents climbed 4.1 per cent during the same period to a record $2.35 per square foot.
• But even the rental market could soon be under pressure. While condo rentals spiked 20 per cent, the number of rental condos coming online grew 22 per cent, suggesting that supply is still larger than demand.
• The Globe and Mail reported that a developer “who declined to be named” estimates the actual prices of condos have fallen by about 15 per cent. With the number of condo sales falling, developers have turned to giving buyers discounts in the form of free furniture or reductions on condo fees, among other things. Thus the official sales prices remain steady, while actual prices come down.

CALGARY

• Ann-Marie Lurie, chief economist for the Calgary Real Estate Board, said there is no good way to measure the effect of flooding on real estate sales. Still, Lurie said most of the increased sales volume likely had little to do with the flood at all, and more to do with market conditions. Notably, the strongest growth occurred in the condo market, which saw a 26 per cent increase in overall sales over the previous year. For single family homes, the increase was 14 per cent.
• Tight market conditions remain for both single family and condominiums. Year-over-year new listings increased in July to 1,958 units, but overall active listings declined to 2,917 units, nearly 20 per cent lower than the already declining levels recorded in 2012.
• Calgary’s luxury real estate market posted record sales in July, when 70 homes exchanged hands for $1 million or more.
• In the first seven months of the year, realtors sold 470 homes worth $1 million or more, compared to 344 purchased during the same period last year, the real estate board said.
• Calgary’s vacancy rate hovers at about one per cent and is the lowest in the country, according to Canada Mortgage and Housing Corp.
• Calgary led the country in July with the best year-over-year price growth in the resale housing market.
• CREA stats indicated Calgary MLS sales in July of 2,976 were up 18.9 per cent from last year while the average sale price jumped by 7.0 per cent to $438,192.
• In Alberta, transactions increased by 17.8 per cent to 6,853 units while the average price was up by 4.3 per cent to $379,696.
• Calgary prices rose by 5.9 per cent from July 2012. Only Hamilton had a bigger increase at 6.7 per cent.
• According to Mike Fotiou, associate broker for First Place Realty in Calgary, luxury home sales in the city have already broke the August record previously set in 2007. And a third of the month still remains. Between August 1-19, Fotiou says a total of 42 homes sold for $1 million or more on the MLS market. In August 2007, there were 38 sales in that price range.

A Market Balanced on the Edge

From a slow winter and spring, May jump started the summer market with an increase in sales, which continued through June and July.  Prices increased, but at it’s slowest pace over the past four years.

Homes under 1-Million have become a ‘hot’ item this summer due to the mortgage rule changes last year, which eliminated mortgage insurance on homes over 1-Million.  We continued to see sales increase as people act on their lower pre-approval rate holds.   Some buyers still have the 2.89%/2.99% 5-year rate holds that will be good until September or October of 2013.   Since the end of May, mortgage rates have increased to a new standard of 3.5% or higher.  A 0.6% rate difference can mean a savings of over $20,000 in interest costs over the 5-year term on a purchase price of $500,000.

In all major cities there has been pressure on rental markets, lowering vacancies and increasing rents.  In Calgary, the floods have increased this pressure and impacted the number of Luxury homes selling in the Calgary area.  Wealthy neighbourhoods along the Elbow River were among the hardest hit, forcing families to find new homes while the repairs or replacements can take place.

There has been a shift happening in most markets across Canada, many saying that the soft landing is in motion and we are for the most part experiencing a balanced market.  But some economist believe this is dragging out the inevitable crash that will see home values decreasing by upwards of 25% across the nation and in particular in Toronto’s over supplied condo market.

More highlights from July’s headlines:

Overall Market

•  The Bank of Canada, which calls households owing more than 250% of their gross income “highly indebted,” said last month that household imbalances remain the biggest domestic risk to the financial system.
• Michael Hsu, vice president at Ipsos in Toronto said “most of the debt Canadians are accumulating is going into real estate and right now the real estate market is holding up quite nicely.”
• After a long cold spring that dampened house hunting, May sales of existing homes rose 3.6%, the biggest monthly gain in almost 2-1/2 years, returning the market almost to where it was before Canada’s Conservative government tightened lending rules in mid-2012 to stave off a housing bubble.
• Housing starts also jumped much more than expected in the month, adding to evidence that late-spring buyers have breathed life back into a market that some had forecast was heading over a cliff.
• Variable rate mortgages, which track prime and are vulnerable to Bank of Canada decisions, are still being offered at about 2.6% for five years. But instead of competing with a 3% fixed rate five-year close mortgage, the competition is a 3.5% product.
• “There is no question that the housing market in Canada is overshooting,” said Benjamin Tal, deputy chief economist of CIBC World Markets. “Now the cocktail party conversation in Canada is: ’Will this lead to a U.S.-style crash?’”
• The market for homes under $1-million has become “red hot,” agents say, and that’s at least partly because new rules brought in by Ottawa last year make it impossible to get a loan backed by mortgage-default insurance if the property is valued in the seven figures.
• Sales of single-family homes over $1-million were up by more than 60% in Vancouver, Calgary and Toronto in the first half of the year compared with the last half of 2012, according to a report released by Sotheby’s International Realty.
• Year over year, sales of luxury single-family homes were up a more modest 10% in Calgary and down by 2% in Vancouver and 5% in Toronto.
• Rates on the five-year mortgage have been rising steadily since the beginning of May in response to bond yields. At one point the Bank of Montreal offered a five-year, fixed rate closed mortgage for as little as 2.99% but that’s now up to 3.59%.
• July started with BMO’s five-year fixed mortgage climbing 0.20 per cent to 3.59 and RBC’s was set at 3.69.
• Canadian home resale prices advanced at the slowest pace in almost four years last month led by a decline in Vancouver, according to the Teranet-National Bank Composite House Price Index.
• Prices across 11 cities rose 1.8% in June from a year ago, National Bank Financial. That is the slowest since a 0.3% gain in October 2009. Vancouver prices dropped 2.8%, the 11th straight decline, while Toronto, Canada’s biggest city, saw a 3.6% gain that was the slowest in almost four years.
• The index, which was set at a reading of 100 in June 2005, climbed to a record 157 in today’s report, meaning resale prices have increased 57% over that time. Prices rose to record highs in six of the 11 cities tracked by Teranet.
• The Canada Mortgage and Housing Corp also revised May starts higher, to 204,616 from the 200,178 originally reported. The seasonally adjusted annualized rate of housing starts was 199,586 units in June, according to data from the Canadian government’s housing agency. Analysts polled by Reuters had expected 187,000 starts in June.
• The Canadian dollar rose from its lowest level in almost two years before a report Tuesday forecast to show the pace of home construction in June stayed above the year-to-date average for the second month in a row.
• About two-thirds of first-time buyers say they’ll purchase a home as planned and are unaffected by new mortgage rules brought in by Ottawa a year ago, says a new survey.
• The federal agency reported that the New Housing Price Index rose 0.1 per cent in May across the country thanks to a 0.9 per cent hike in the Calgary census metropolitan area.
• CMHC market analyst Lance Jakubec’s opinion, the uptick in single-family home starts demonstrates Metro Vancouver is “a large, metropolitan area, a popular area for people to move to.” Jakubec said construction activity has moved up in recent months. In June, the pace that builders were starting new homes increased to the point where they will have begun 17,575 new unit by the end of the year if the pace holds, according to the CMHC’s measure of the trend-line for construction.
• Building permits are a leading indicator of builders’ future intentions, and the latest report from Statistics Canada hinted that the region may continue to see lower levels of construction. Metro Vancouver’s builders took out $556 million worth of permits in May, which was down 13 per cent from April and down 30 per cent from the same month a year ago.
• B.C. as a whole saw the biggest month-to-month decline in residential building permits. Across the province builders took out $596 million worth of permits for residential building projects, down 15.5 per cent from April and 10-per-cent below levels a year ago.
• Canada saw residential permit values hit $4.6 billion in May, up 4.5 per cent from April and 3.4-per-cent more than the same month a year ago, according to Statistics Canada.
• Canadian housing price drops as little as 2 per cent to 3 per cent is a far cry from the 40 per cent to 70 per cent collapse in housing prices in the epicentres of the U.S. boom and bust, notably California, Florida, Arizona and Nevada.
• Stephen Poloz, who took over as central bank governor in June, decided to again leave the BoC’s key borrowing rate at 1% — where it has been since September 2010 — was the first opportunity to directly influence monetary policy.
• Canadian Real Estate Association says home sales in June were down from a year ago but up from the previous month. The association says sales last month were down 0.6% from a year ago, but up 3.3% when compared with May.
• When compared with a year ago, Toronto and Montreal were lower, while Vancouver, Calgary, and Edmonton were up compared with last June.
• CREA says some 240,068 homes have sold in Canada through its MLS system so far this year, down 6.9% from the first half of 2012.
• CREA president Laura Leyser noted that June was the second month in a row where sales improved in a majority of local markets. “Whether those gains reflect temporary factors or a fundamental improvement after a slow start to the year really depends on where you are,” Leyser said.
• Higher interest rates helped national home sales inch upwards in June, from May, buoyed by buyers holding pre-approved mortgages deciding not to wait any longer, the Canadian Real Estate Association reports.
• A study released by the Bank of Montreal (TSX:BMO) found that 83 per cent of Canadians surveyed admit to having some form of debt, an increase from 74 per cent a year earlier. The poll also found that the average amount of monthly debt repayment has fallen by 13 per cent from a national average of $1,138 to $986. Regionally, those in Alberta had the highest amount of debt payments each month at $1,225, while those who live in Quebec reported the least amount at $768.
• A study from Canso Investment Counsel, a corporate bond management firm, says mortgage securitization — bundling mortgages together and selling them to investors — has spiralled out of control in Canada in recent years. The result, the report said, is that the proportion of government-insured mortgages in Canada went from 30 per cent in 1988 to 75 per cent in 2013.

Predictions

• Tal,a Canadian Imperial Bank of Commerce employee, believes that Canada will come in for a soft landing, not a crash. But Toronto’s condo industry still feels uncertain.
• If anything, the gap might widen between rates for short-term and long-term mortgages, after being historically low. “It means sensitivity to interest rates will rise because people will go to what is affordable,” said Mr. Tal.
• A sustained rise in interest rates of just one per cent could cause Toronto area home sales to tumble by 15.3 per cent and prices to decline by 5.8 per cent by 2015, predicts a veteran housing analyst.
• Many economists believe Toronto’s decade-long housing boom has been largely credit-driven and that, as rates start climbing, the bubble could burst, especially in what the Bank of Canada has warned is the city’s over-supplied condo sector.
• “The real test will come in the fall,” says Dunning. chief economist for the Canadian Association of Accredited Mortgage Professionals, when those pre-approvals have expired, especially if rates hold at their new or even slightly higher levels.
• Overall, the Canadian housing market is expected to see a pickup in sales in the second half of 2013, but prices are likely to remain soft into mid-2014 when the country should start emerging from what’s nothing more than a “normal cyclical correction” that began a year ago, says a market survey forecast. Calgary is expected to lead the way, with 6.5 per cent house price growth by the end of this year, followed by Regina (5.8 per cent), and Winnipeg (3.9 per cent).
• TD Bank economist Diana Petramala said she expects sales to slow down during the summer and fall, but noted they should remain at healthy levels.

Vancouver

• Home sales in the Vancouver area were up 11.9% in June compared with a year ago, according to the latest MLS figures.
• Real Estate Board of Greater Vancouver (REBGV) says there were 2,642 homes sold through its Multiple Listing Service last month, up from 2,362 sales in June 2012, but down from the 2,882 sales in May 2013.
• REBGV said the June sales were 22.2% below the 10-year average for the month, while new listings for the month were 11.5% below the 10-year average.
• The total number of properties listed for sale on the MLS system in Greater Vancouver was 17,289, down 6% from a year ago and up 0.4% compared with May 2013.
• The MLS Home Price Index composite benchmark price for Greater Vancouver was $601,900, down 3% compared with a year ago.
• “The market was moderating in the second half of 2012. Then we’ve had an inflection point, and went into a moderate positive trend since the beginning of 2013,” said Mathieu Laberge, deputy chief economist at CMHC. “We should see this type of trend for housing starts going forward. The agency, which insures the majority of mortgages Canadian banks issue, expects average national prices to rise 1.6% in 2013 and 2.1% in 2014, which would be the “soft-landing” policymakers want and a long way from dire predictions of a 10% to 25% price crash.
• Others believe the spring surge may reflect demand that was held back by the tighter rules, and the housing market’s failure to really cool means a bubble is starting to inflate again. Official Canadian interest rates are not expected to rise until late 2014, so mortgage rates won’t rise fast or furiously.
• “A lot of forecasters like myself are expecting a relatively flat market, but there’s a significant upside risk that if rates remain at current levels indefinitely, you’re going to start to heat the housing market back up,” said Craig Alexander, chief economist at Toronto-Dominion Bank, Canada’s second-largest lender.
• Intentions of buying a condo in Vancouver has dipped by five points, from 33 per cent in the fall to 28 per cent.
• In its most recent sales report, the Real Estate Board of Greater Vancouver said realtors sold 1,068 apartments in the month of June, a rebound of 4.1 per cent over the same month a year ago. Sales of detached homes, however, were up 20 per cent.
• On pricing, the board reported that the benchmark condo price hit $369,800 in June, which is up 2.2 per cent from January, but still 1.9 per cent below where prices were a year ago and a level that hasn’t gained any ground over the last five years.
• The board’s benchmark for detached homes of $919,900, however, while still down 4.3 per cent from levels a year ago, is up about 15 per cent over the last five years.
• In Vancouver “balanced” market conditions exist, according to the Fraser Valley and Greater Vancouver real estate boards.
• The total number of Greater Vancouver MLS listings has fallen six per cent in the past year to 17,289. Fraser Valley listings have declined one per cent in the past year to 10,515.
• The benchmark price for all Greater Vancouver residential properties sits at $601,900 — a three-per-cent decline from a year ago but a 2.3-per-cent increase from January.
• The benchmark price for a Fraser Valley single family home has risen 0.2 per cent in the past year to $552,200 but the benchmark price for townhouses in the region has fallen 2.1 per cent in the past 12 months to $298,700.
• Real Estate Board of Greater Vancouver president-elect Ray Harris said, “We saw price declines in the second half of last year but have gained a lot of that back this year.”
• Langley has a sales-to-listings ratio of 26 per cent, which approaches sellers’ market conditions.
• In Vancouver, which has seen some of the biggest drops in sales of all major Canadian cities since the market started softening last spring, condo prices were down 3.3 per cent, to an average $490,475, as of the end of June.
• Detached bungalows saw price declines of 3.2 per cent during the same period, bringing the average price to just over $1 million, and the standard two-storey home dropped by 2.3 per cent to an average of $1.15 million.
• Vancouver’s famously overpriced housing market continues its own correction, with prices down three per cent, and condo markets around the country are under pressure.

Toronto

• Housing sales in the Greater Toronto Area were down by less than 1% in June compared with the same month a year ago, while the average selling price was up by 4.7% at $531,374, according to a report by Toronto Real Estate Board.
• June price growth was driven by single-detached and semi-detached houses, particularly in the city of Toronto.
• Over the same time period, average condominium apartment selling prices remained in line with 2012 levels, it said.
• “While the number of transactions was still down compared to 2012, rates of decline were substantially improved compared to the first quarter.”
• Detached home sales in Toronto’s 416 area code were down 6.9% at 1,137 in June, but the average price was up 8.1% at $866,326.
• 3.2% increase in sales to 3,411 in the 905 area, where year-over-year prices were up 4.9% at $598,708.
• 416 area saw a 3.1% decrease in sales to 380, but a 9.5% increase in prices to $618,194, and a 0.8% increase to 623 in the 905 area where prices were up 3.7% at $411,877.
• Condo apartment sales were down 4% at 1,329 in the 416 area, while the average price was relatively stable, up just 0.3% at $366,532.
• At the same time, 905-area sales were down 2.3% at 556, with the average year-over-year selling price up 0.9% at $288,604.
• Low vacancy rates in Toronto make it easy for condo owners to find renters, while resale statistics suggest that most of those investor-purchasers are holding their units for long-term gains rather than flipping them for quick profits.
• Canadian banks have also kept tight rein on developers. Before developers are lent construction money, they generally must sell 70 to 80% of units in any project in advance. Given that, Urbanation, a company that tracks the Toronto condo industry for developers and lenders, estimates that 89% of the units now being built in Toronto are already sold.
• In Toronto, 31 per cent of prospective buyers plan to purchase a condo in the next five years, up 11 points.
• GTA prices were up 4.7 per cent year-over-year to an average $531,374, while Vancouver prices slipped by 3 per cent.
• Even condo prices held steady, with GTA sales prices averaging $343,546 across the GTA ($366,532 in the 416 region and $288,604 in the 905 regions), despite the fact the inventory of condos for sale remains at unusually high levels and sales were down 3.5 per cent.
• As of the end of June, the average sale price of a detached bungalow in the GTA was up 3.1 per cent to an average of $577,495 compared to the first half of last year, says Royal LePage in its quarterly house price survey.
• The price of a standard two-storey home was also up, some 2.2 per cent, to an average of $683,241.
• The latest data from the Toronto Real Estate Board finds residential real estate prices in Canada’s largest city spiked 8.1 per cent, year over year, in the first half of July. The average price of a house in the Greater Toronto Area broke through the half-million-dollar mark, and now sits at $510,819.

Calgary

• Intentions to buy property in the next five years among homeowners in four of Canada’s major city centres, and revealed that in Calgary prospects for condos among homebuyers has risen eight points from the fall (33 per cent versus 25 per cent) while intent to buy a traditional home has dropped from 71 per cent to 58 per cent.
• Calgary Real Estate Board, year-to-date until the end of June there have been 2,034 MLS sales in the city’s condo apartment market, up 9.53 per cent from last year. The average sale price has increased by 6.91 per cent to $297,530.
• Data released by the Calgary Real Estate Board indicate average MLS sale prices for both the overall market in the city as well as for single-family homes were the highest ever.
• The overall MLS average sale price in the city reached $466,458, up 5.6 per cent from last year, eclipsing the record of $462,076 which was set in May.
• In June, the average single-family home price hit $527,162, up 7.7 per cent from last year, and eclipsing May’s record of $521,887
• According to CREB, there were 2,317 total MLS sales in the city in June, an increase of 5.51 per cent from last year. The median price rose by 3.32 per cent to $405,000.
• In the single-family market, sales rose by 2.06 per cent to 1,638 and the median price was up by 4.65 per cent to $450,000.
• The condo apartment category saw sales rise by 6.78 per cent to 362 units with the average price dipping by 0.35 per cent to $301,193 but the median price rising by 2.12 per cent to $265,500.
• CREB also tracks what it terms benchmark prices for typical properties sold. The benchmark prices in June and percentage change from a year ago were: total MLS, $412,000, 6.79 per cent; towns, $346,200, 6.39 per cent; single-family, $459,700, 6.71 per cent; condo apartment, $264,000, 7.19 per cent; and condo townhouse, $295,000, 6.12 per cent.
• On a year-over-year basis, prices in the Calgary region rose by 5.3 per cent. Nationally, they were up 1.8 per cent on an annual basis.
• Don Campbell, senior analyst and founding partner of the Real Estate Investment Network, said it’s too early to speculate that flood-ravaged victims are buying up homes elsewhere in the city as there’s no way insurance claims and financing can move that quickly.
• Increasing sales are more likely due to a growing population and renters entering the market, he said.
• Mike Fotiou, associate broker with First Place Realty showed that the year-to-date until the end of June, there have been 394 luxury home sales, up from 299 for the same period last year, which set a record of 544 sales for the year.  There were 74 luxury home sales in June, setting a record for the most $1-million plus sales for the month of June. The all-time monthly record for luxury home sales was established in May at 84.
• Last month’s record floods are driving up demand for homes as both displaced millionaires from posh neighbourhoods that were flooded and former renters jump into the market, Calgary realtors say.
• Wealthy neighbourhoods along the Elbow River were among the areas hardest hit by the flooding, prompting some homeowners, whose properties will take at least several months to repair, to buy homes elsewhere in the meantime.
• As a result, multimillion dollar homes that would ordinarily take a year to sell are being snapped up for about 10 per cent more than they normally would within a matter of weeks, Keeper said.
• Calgarians are eager to buy property not necessarily because they’ve been directly displaced by the flooding themselves, but because they foresee a tighter market ahead generally, Hornby added. Re/Max associate Mike Hornby
• Calgary rents jumped by more than seven per cent over a 12-month period, the biggest annual rise in Canada, as the average rent for a two-bedroom apartment reached a record $1,202, CMHC reported.
• “With more people looking for places to rent, especially those who are displaced temporarily from the flooding, we’re expecting to see more pressure on the rental market,” said Richard Cho, senior market analyst with CMHC’s Calgary branch.