Moderate May home sales point at possible 2017 cooldown—CREA

In its latest round of figure releases, the Canadian Real Estate Association (CREA) noted that the 2.8 per cent month-over-month decline of existing home sales in May might indicate a possible cooldown in the country’s housing markets next year.
 
As reported by Garry Marr for the Financial Post, CREA projected that 2017 sales will grow by only 0.2 per cent, after a predicted 6.1 per cent increase by the end of this year.
 
“National sales activity and average prices reached new heights in the first half of 2016 amid a growing supply shortage of single-family homes in British Columbia and Ontario, particularly in B.C.’s Lower Mainland as well as in and around the Greater Toronto Area,” the association stated in a news release.
 
Part of what would pull down next year’s market performance would be sales volume in British Columbia and Ontario, which would decline and remain static, respectively.
 
“In these two provinces, luxury sales activity is anticipated to recede from current levels, resulting in a decline in their share of total sales activity,” CREA explained.
 
“This suggests a lack of supply may be starting to rein in sales amid a continuation of strong housing demand,” chief economist Gregory Klump added. “The proportion of sales above that is just not predicated to rocket ever higher.”
 
Meanwhile, Alberta and Saskatchewan home sales are expected to benefit from the upward trend in oil prices.
 
Despite the steady growth over the past few years, however, CREA maintained that 2007 remains the best year for housing sales in the country.
 
Observers voiced cautious agreement with the association’s prediction that a market slowdown is in the offing.
 
“The long-awaited cooling of Canada’s housing market may be finally at hand,” Royal Bank of Canada senior economist Robert Hogue said. “Only time will tell. When you look at market conditions in Canada’s two hot markets, it is still very, very tight.”

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COMMENTS

  • by Ian Hocking, broker 2016-06-17 11:19:07 AM

    Interesting post but I feel it might actually miss the mark. It's not so much higher volume that has been the issue but out of control prices. Lower volume can be a driver of higher prices as with less on the market people fight over what is there. However, what may not be so easy to judge is the number of properties now being sold, "Off" the MLS. In the last 2 months 30% of our sales volume didn't go through the MLS at all with Sellers preferring not to get caught up in the general crazy ness, controlling the closing date in a more flexible way, and by us literally having a Buyer and finding a specific home for that Buyer. There seems to be a lot more agent to agent conversation going on where agents can bring a Buyer and Seller together without having to subject their clients to the somewhat stressing process of open market bidding. I would also add that 35% of our current listing inventory is not listed anywhere on the MLS and is essentially invisible with the exception of our own client base while we look for specific homes for those potential Sellers.
    Clients are appearing to move towards a market model that favours a bespoke, controlled service with dedicated agents looking for specific types of properties. I could be wrong but I suspect the data that CREA has access to maybe is being skewed slightly based on this off market situation. However, I would agree that the house 'price' rise is due for a slow down, but that is based on economic drivers, such as interest rates which are essentially done going down. One of the reasons that the number of foreclosures in Ontario and Bc has dropped substantially is the rise in pricing that has allowed people to refinance their way out of immediate debt situations. Unless house prices rise again, sooner or later those people will find themselves needing to refinance again as people seldom change habits when they are not forced to. Interest rates are more likely to remain static ,or rise slightly over the next 12months, hence the affordability of housing will not decrease and a knock on from that will be an inability for prices to rise. You cannot have house price inflation at 15-20% for too many years with salary inflation at 3% before you have a major issue. Let's all hope that the housing market decides to go sideways for a few years to avoid a major issue.

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