It was a very merry Christmas for property-seeking Canadians in December – not to mention the real estate agents who were involved in the purchase process – as home sales all across the country rose yet again.
According to the Canadian Real Estate Association, residential transactions increased 4.5 percent from November and roughly 4 percent on a seasonally adjusted, year-over-year basis. It marks the fifth straight period in which sales ratcheted higher from the previous month, reversing the downward trend that had taken hold throughout much of last summer.
Andrew Peck, CREA president, indicated he expects buyers' appetite will remain robust into 2018.
"Monthly momentum for national home sales activity gained strength late last year and further expected economic and job growth will buoy sales activity this year despite slightly higher expected interest rates," Peck explained. "Even so, momentum for home sales differs depending on location and type."
Sales prices up, but at slower pace
The pace in which asking prices elevated in December was similarly variable, likely playing into the amount of properties sold in various regions. Benchmark home values fell 0.4 percent in Calgary during the final month of 2017 compared to the corresponding period in 2016, CREA reported, but they jumped more by than 6.5 percent in Ottawa on a year-over-year basis. Price gains were also up in the Greater Toronto Area, but not quite to the degree as they've gone in previous months, up, 7.2 percent in the GTA and 13.1 percent in Guelph, which lies west of Ontario's capital city.
CREA president Gregory Klump chalked up the holiday homebuying hunt to individuals looking to take advantage of the more lax mortgage lending standards, which tightened in January.
"National home sales in December were likely boosted by seasonal adjustment factors and a potential pull-forward of demand before new mortgage regulations came into effect this year," Klump said. "It will be interesting to see if monthly sales activity continues to rise despite tighter mortgage regulations that took effect on January 1st."
The stricter lending requirements are in place to better establish whether borrowers have the financial capability to pay back what they owe. To determine this, would-be buyers will be subjected to a stress test, even for those who put a 20 percent down payment on their homes. This previously wasn't mandatory for those whose down payments were one-fifth or more of home values. Real estate experts believe the tighter lending standards may help reduce demand, giving developers the extra time they need to resupply dwindling inventories. Asking prices may diminish as well.
Housing production ended 2017 on a positive note, with approximately 226,777 units underway in December on a seasonally adjusted annual basis, according to the Canada Mortgage and Housing Corporation. That's up slightly from November, when the trend measure was 226,178.
Bob Dugan, CMHC's chief economist, referenced how in addition to more single-home construction projects breaking ground in December, more apartment complexes began to take shape in the month, up 6.2 percent in urban locales compared to last year.
Market starting to balance out
For much of 2017 – and long before then – buyers outnumbered sellers by a wide margin. That distribution has been shifting the other way ever so slightly, with newly listed homes rising 3.3 percent in December, the CREA noted in its monthly report. The sales-to-new listings ratio has as a result evened out, staying in the mid-to-high 50 percent range. Any number between 40 percent and 60 percent is considered a balanced housing market, meaning there is roughly an equivalent level of buyers and sellers at the national level, but this distribution may differ among individual markets.
As for what the typical home sold for during in the 12th and final month of 2017, the non-seasonally adjusted national price was approximately $496,000, according to the CREA, nearly 6 percent more than what the cost was in 2016. As with previous months, though, the national average is much more affordable when the GTA and Vancouver – the two hottest housing markets – are not included in the average. Not including these two cities, the typical property sold for a more reasonable $381,000.