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Canadian Home Sales Fell For Fourth Consecutive Month in August

Diane Buchanan • September 15, 2016

This morning, The Canadian Real Estate Board (CREA) released their national real estate statistics for August, which showed a further slide in home sales as new listings resumed their decline and home prices increased once again. For Canada as a whole, the number of homes trading on the MLS Systems fell 3.1% month-over-month in August–the largest monthly decline since December 2014. Combined with the plunge in home sales in the prior three months, the August slide places national home sales activity 6.9% below the record set in April of this year. 

Sales activity fell in almost 60% of all markets in August, led by the steep decline in Greater Vancouver following the August 2nd introduction of the new property transfer tax on homes purchased by foreign buyers. According to the CREA, activity also declined in the Fraser Valley and August marked the sixth consecutive monthly decline in the Lower Mainland. 

“The sudden introduction of the new property transfer tax on homes purchased by foreign buyers in Metro Vancouver has created a cloud of uncertainty among home buyers and sellers,” said CREA President Cliff Iverson. “That the tax applies to sales that had not yet closed shows how the details for a new tax policy can unnecessarily destabilize housing markets.”

“Single family homes sales were already cooling before the new land transfer tax on foreign home buyers in Metro Vancouver came into effect,” said Gregory Klump, CREA’s Chief Economist. “The surprise announcement of the new tax caused sales to brake hard.”

In direct contrast, activity in Greater Toronto continued strong, further evidence that the new tax on purchases by foreigners in Vancouver did have a meaningful impact. On a not seasonally-adjusted basis, actual sales activity for the country as a whole was up 10.2% y-o-y in August. Sales were up from year-ago levels in about three-quarters of all Canadian markets, led by Greater Toronto. Greater Vancouver posted the largest y-o-y sales decline. 

Listings Fall Again

The number of new listings resumed their decline in August, falling 2.7% from July–down in four-out-of-five of the previous months. Declines in new listings in the Lower Mainland, Greater Toronto and Montreal more than offset gains in less active markets.

Many potential home sellers have been reluctant to put their properties on the market. With the continued rise in prices, sellers have been waiting to garner additional gains in value. In addition, many have been priced out of alternative housing options. Clearly, a sustained softening in home prices in Vancouver, Toronto and Montreal could trigger a deluge of new listings, which would further soften prices. This would be a dramatic and long-awaited reversal of the pattern we have been experiencing for many months now. 

Sales-to-New-Listings Ratio 

With sales and new listings both down by similar magnitudes in August, the national sales-to-new listings ratio was little changed at 61.6%–down from the high of 65.3% posted in May. A ratio in the range of  40%-to-60% is considered generally consistent with balanced housing market conditions. Above 60% is considered a sellers’ market and below 40%, a buyers’ market. 

The sales-to-new-listings ratio was above 60% in almost half of all local housing markets in August–virtually all of which continued to be in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario. Quite importantly, the ratio moved down to the mid-50% range in Greater Vancouver in August, reflecting the outsized plunge in sales, after having begun the year at a whopping 90%.

Number of Months of Inventory

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity. 

There were 4.8 months of inventory on a national basis at the end of August 2016. This was up from 4.6 months in the previous three months and marked the first increase in almost a year.

The number of months of inventory had been trending lower since early 2015, reflecting increasingly tighter housing markets in Ontario – and, until recently, in B.C. It nonetheless remains below two months in Victoria and virtually everywhere within the Greater Golden Horseshoe region, including Greater Toronto, Hamilton-Burlington, Oakville-Milton, Guelph, Kitchener-Waterloo, Cambridge, Brantford, the Niagara Region, Barrie and Woodstock-Ingersoll. Indeed, major areas within the GTA have less than one month of inventory.

Prices Continue to Rise

The Aggregate Composite MLS House Price Index (HPI) rose 14.7% y-o-y last month, the largest gain in nearly ten years. This price index, unlike those provided by local real estate boards and other data sources, provides the best gauge of price trends because it corrects for changes in the mix of sales activity (between types and sizes of housing) from one month to the next. 

For the seventh consecutive month, y-o-y price growth accelerated for all types of property. Two-storey single family home prices continued to rise the most (16.3%), followed by one-storey single family homes (14.4%), while apartment unit prices rose 11.7% y-o-y.

Greater Vancouver (+31.4 percent) and the Fraser Valley (+38.3 percent) posted the largest y-o-y gains by a wide margin. Smaller double-digit y-o-y percentage price gains were also recorded by Greater Toronto (+17.2 percent), Victoria (+18.9 percent) and Vancouver Island (+13.1 percent).

By contrast, prices were down -4.1 percent y-o-y in Calgary in August. Although prices there have held steady since May 2016, they have remained down from year-ago levels since September 2015 and are 4.7 percent below the peak reached in January 2015.

Additionally, prices were down by -0.9 percent y-o-y in Saskatoon in August. While prices have remained below year-ago levels since August 2015, they are on track to begin rebounding before year-end should current trends persist.

Meanwhile, home prices posted additional y-o-y gains in Greater Moncton (+6.6 percent), Regina (+3.7 percent), Greater Montreal (+2.5 percent) and Ottawa (+1.7 percent).

 

This article was written by Dr. Sherry Cooper, Chief Economist with Dominion Lending Centres. It was originally published  here.

DIANE BUCHANAN
 Mortgage Broker

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How To Get The Best Mortgage

By Diane Buchanan • February 19, 2025
If you’re looking to buy a property or have a mortgage up for renewal, and you’re thinking about connecting with your bank directly, save yourself a lot of money and regret by reading this article first. Here are four things that your bank won’t tell you, accompanied by four reasons that explain why working with an independent mortgage professional is in your best interest. Banks have Limited Access to Mortgage Products. Now, while this one may seem pretty straightforward, if you’re dealing with a single institution, they can only offer mortgages from their product catalogue. This means that you’ll be restricted to their qualifications which are usually very narrow. Working with a single institution significantly limits your options, especially if your financial situation isn’t straightforward. In contrast, dealing with an independent mortgage professional, you will have access to products from over 200 lenders, including banks, monoline lenders, credit unions, finance companies, alternative lenders, institutional B lenders, Mortgage Investment Corporations, and private funds. Working with an independent mortgage professional will give you considerably more options to secure a better mortgage. Banks Employ Salespeople, not Mortgage Experts. Banks don’t employ mortgage experts; they employ salespeople. Banks pay and incentivize salespeople to sell their products. There is a fundamental misalignment of values here. If the bank incentivizes a banker to make a profit for the bank, how can they at the same time advocate for you and your best interest? They can’t. Banks don’t have your best interest in mind. In fact, the more money they make off of you, the better it is for their bottom line. However, when you work with an independent mortgage professional, you get the experience of someone who understands the intricacies of mortgage financing and will advocate on your behalf to get you the best mortgage. It’s actually in our best interest to assist you in finding the mortgage with the best terms for you. Once your mortgage completes, we get paid a standardized finder’s fee by the lender for arranging the financing. So although we get paid by the lender, that lender has had to compete with other lenders to earn your business. When you work with an independent mortgage professional, everyone wins. You get the best mortgage available, we get paid a standardized finder’s fee, and the lender gets a new borrower. Banks Rarely Offer You Their Best Terms Upfront. Banks are in the business of making money, and they’re usually pretty good at it. As such, banks will rarely offer you their best terms at the outset of your negotiation. This is especially true if you’re looking to refinance your existing mortgage. With over half of Canadians simply accepting the renewal offer they get sent in the mail without question, banks don’t have to put their best rate forward. Instead, they rely on you to be ignorant of the process and will take advantage of your trust in them. When you work with an independent mortgage professional, we don’t play games with rates and terms. Our goal is always to seek out the lender who has the best mortgage for you from the start of the process, and if there are any negotiations to be had, we handle them for you. There is no reason for us to do otherwise. In fact, the better we do our job, the more likely it is that you’ll be happy with our services and refer your friends and family. Banks Promote Restrictive Mortgage Products. As if it’s not bad enough that banks don’t offer their best terms upfront, they actually promote mortgage products that are restrictive in nature. The fine print in your mortgage contract matters; understanding it is challenging. Banks do what they can to make it hard for you to leave. Now, if you’ve ever heard stories of outrageous penalties being charged, this is what’s called an Interest Rate Differential penalty (IRD). Each lender has its own way of calculating the IRD. Chartered banks are known for their restrictive mortgages and high IRD penalties. When you work with an independent mortgage professional, we take the time to listen to your goals and assess your mortgage needs based on your life circumstances. The best mortgage is the one that lowers your overall cost of borrowing. So not only will we walk through the cost of the mortgage financing, but we’ll also clearly outline the costs incurred should you need to break your mortgage before the end of your term. This might be the deciding factor in choosing the right lender and mortgage for you. Working with an Independent Mortgage Professional is in Your Best Interest. Banks have limitations to the mortgage products they offer. Working with an independent mortgage professional gives you mortgage options! Bankers work for the bank; they are incentivized to make money for the bank. An independent mortgage professional advocates on your behalf to get you the best mortgage available. Banks rarely offer their best terms upfront; they leave negotiations up to you. An independent mortgage professional outlines the best terms from multiple lenders at the start of the process. Banks promote restrictive mortgage products that make it difficult to leave them. An independent mortgage broker will outline all the costs associated with different mortgage products and recommend the mortgage best suited for your needs. So if you’d like to talk about the best mortgage product for you, you’ve come to the right place. Please connect anytime. It would be a pleasure to work with you.

Are You Ready To Buy A Home?

By Diane Buchanan • February 12, 2025
Buying your first home is a big deal. And while you may feel like you’re ready to take that step, here are 4 things that will prove it out. 1. You have at least 5% available for a downpayment. To buy your first home, you need to come up with at least 5% for a downpayment. From there, you’ll be expected to have roughly 1.5% of the purchase price set aside for closing costs. If you’ve saved your downpayment by accumulating your own funds, it means you have a positive cash flow which is a good thing. However, if you don’t quite have enough saved up on your own, but you have a family member who is willing to give you a gift to assist you, that works too. 2. You have established credit. Building a credit score takes some time. Before any lender considers you for mortgage financing, they want to see that you have an established history of repaying the money you’ve already borrowed. Typically two trade lines, for a period of two years, with a minimum amount of $2000, should work! Now, if you’ve had some credit issues in the past, it doesn’t mean you aren’t ready to be a homeowner. However, it might mean a little more planning is required! A co-signor can be considered here as well. 3. You have the income to make your mortgage payments. And then some. If you’re going to borrow money to buy a house, the lender wants to make sure that you have the ability to pay it back. Plus interest. The ideal situation is to have a permanent full-time position where you’re past probation. Now, if you rely on any inconsistent forms of income, having a two-year history is required. A good rule of thumb is to keep the costs of homeownership to under a third of your gross income, leaving you with two-thirds of your income to pay for your life. 4. You’ve discussed mortgage financing with a professional. Buying your first home can be quite a process. With all the information available online, it’s hard to know where to start. While you might feel ready, there are lots of steps to take; way more than can be outlined in a simple article like this one. So if you think you’re ready to buy your first home, the best place to start is with a preapproval! Let's discuss your financial situation, talk through your downpayment options, look at your credit score, assess your income and liabilities, and ultimately see what kind of mortgage you can qualify for to become a homeowner! Please connect anytime; it would be a pleasure to work with you!
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