Is the impact of the stress test starting to fade?

National home sales improved in July with a 1.9% rise in sales compared to the previous month.

CREA says that although sales have been trending higher over the past three months now, they are still running below the levels seen a year earlier.

A major factor in this year’s weaker activity has been the B-20 mortgage guideline changes at the start of the year, specifically the introduction of mortgage stress tests.

"This year's new stress-test on mortgage applicants continues to weigh on home sales but its effect may be starting to fade slightly in Toronto and nearby markets," said CREA President Barb Sukkau. "The degree to which the stress-test continues to sideline home buyers varies depending on location, housing type and price range.”

Actual (not seasonally adjusted) activity was down 1.3% y-o-y. The result reflects fewer sales in major urban centres in British Columbia and an offsetting improvement in activity in the GTA.

New listings nationally dropped 1.2% to levels below the average for the past 8 years and the sales-to-new-listings ratio tightened to 55.9%.

There were 5.3 months of inventory on a national basis at the end of July 2018, down from 5.4 months in June and near the long-term average of 5.2 months.

Prices rise, first HPI acceleration since April 2017
CREA’s aggregate HPI increased 2.1% year-over-year in July, the first y-o-y growth in prices since April 2017.

The price rises were led by apartments, up 10.1%, with townhouses up 4.7% and single-family prices declining 0.7% for one storey and 1.5% for two storey homes.

"Improving national home sales activity in recent months obscures significant differences in regional trends for home sales and prices," said Gregory Klump, CREA's Chief Economist. "Regardless, rising interest rates and this year's stress test on mortgage applicants will likely prove to be difficult hurdles to overcome for many would-be first time and move-up homebuyers, heading into the second half of the year and beyond."

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