Home prices fall in March
Jon Cook – Reuters
Canadian home prices fell in March from year-ago levels even as existing home sales activity picked up, with a cooling of the once-hot Vancouver market offsetting big price gains in Toronto and steady increases elsewhere.
Comment: As I have said, we only see prices dropping, on average, because of Vancouver. Toronto is still rising, which is all that matters for us here.
A report on Monday from the Canadian Real Estate Association showed the average residential home price in March was $369,677, down 0.5% from the same period last year. The figures are not seasonally adjusted. But the broad number masked big differences between cities and regions.
The average selling price in Vancouver, Canada’s most expensive major market, fell 3.1% from a year earlier to $761,742. Prices in the nearby Fraser Valley area tumbled nearly 10%.
But prices in Toronto, which has seen a boom in condominium construction, jumped 10.5% in March from a year earlier.
Comment: Because we have no supply here, there are no houses for people to buy. Condos are doing fine, but houses are sparking frenzies all over the city.
“The slight decline in the national average price points to a tug of war between Toronto and Vancouver,” Gregory Klump, the industry group’s chief economist, said in a statement.
Klump added that national prices in 2011 had been pushed higher by “record level high-end home sales in some of Vancouver’s priciest neighbourhoods.”
The report also showed existing home sales climbed 2.5% in March from February on a seasonally adjusted basis.
But the increase, unadjusted, was up just 1.6% from year-earlier levels. This represented the lowest yearly growth rate since April 2011.
“While it is difficult to see in the monthly data, there is a sense that the housing market is gradually slowing,” David Tulk, chief Canada macro strategist at TD Securities wrote in a research note.
Comment: Because only one of the top 16 cities in the country saw prices drop? Prices rising in 15 of 16 cities means that real estate is slowing down? Uh… not so sure about that…
“The dynamics of this report show a maturation of the housing market cycle in Vancouver which is likely to be repeated in Toronto over the coming year. Outside of these two markets, the rest of the national market is still holding in reasonably well.”
Comment: No, Vancouver was bubbly. Prices shot way way up and way way faster than Toronto. Their average price is about 35% higher than Toronto, we have a lot of room to grow. We might see a flattening, but with prices rising 8% in 2010, then 9% last year and now we are over 10%? I can’t see that trend reversing over night. Not even over a period of a few years. There is still WAY too much demand. With all of the bidding wars, every house that sells has one winner – and 9 losers. Or more. Those people still want a house. That pressure is not going to let up any time soon.
Tulk added that gradually rising Canadian interest rates over the next two years should help slow the market further.
Comment: Nope, things were frenzied a couple of years back when rates were 2% higher.
The news should provide some relief to the Bank of Canada, which has warned that rising household debt levels, in many cases the result of large mortgages, are the biggest domestic threat to the economy.
Comment: The good news is that people are paying down their debt. But that has nothing whatsoever to do with real estate.
Canada’s housing sector never experienced the subprime mortgage boom and bust that drove the United States into recession. And a post-crisis housing market rally, triggered by record low borrowing costs, played a key role in driving the recovery.
Comment: If we never had a bust, how can we have a recovery? We are just staying on the same steady track we have been on since 1996. Heck, we have been on the same track since 1966 except for a brief downward blip in the early 1990s.
But Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have both expressed concern about the housing boom, with Flaherty tightening mortgage rules several times to try to cool the market.
Comment: And it did not work. He could up the minimum down payment to 7.5%, which might help. Get rid of 30-year amortizations. He has a lot of tools he can use. And if he was THAT concerned, he would use one of them.
Contact the Jeffrey Team for more information – 416-388-1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.