A first look at Canada’s housing market in September would tell you that it’s actually in the middle of a free-fall than they are in a cooling period. But a closer, and more accurate, look will reassure you that this is just Finance Minister Jim Flaherty’s measures at work.
According to the Canadian Real Estate Association, home sales fell in Canada by a dramatic 15.1 per cent last month when compared with September of 2011. CREA’s data also showed that most of Canada’s markets have dropped in sales by at least 10 per cent. Frightening numbers indeed, but let’s take a closer look.
Once the numbers are adjusted for seasonal trends (people buy more in the summer and the winter drop-off begins in the fall,) CREA shows that September sales actually increased by 2.5 per cent when compared with August of this year. That may not sound like a large increase, but it’s the biggest one the Canadian market has seen since March of this year. In fact, even Vancouver saw an increase this month of 4.2 per cent in their sales; and this is the housing market that people have been the most concerned about over the past year.
But things aren’t so rosy in Toronto, the market that has now taken over Canada’s concerns in place of Vancouver. The CREA shows that Toronto home sales were down by about 21 per cent in September; and that sales dropped by 10.5 per cent in the beginning half of October when compared with the first two weeks of the month last year. Meanwhile, inventory kept coming with the city seeing a 5.5 per cent increase in listings this month.
“The Canadian housing market has clearly lost some of its lustre,” says Francis Fong, TD Bank economist. “Sales have fallen from their peaks in most markets across the country with today’s gain only partially offsetting August’s substantial decline.”
Yes, the fact that home sales were also down in August is certainly just one more indication that the market is cooling. And that’s exactly what Jim Flaherty was hoping for with his new mortgage rules.
“The recent mortgage insurance changes are working,” he said. “It is cooling the market and sales have ratcheted down compared to a year ago. We do anticipate that sales are going to remain below year-ago levels for the rest of the year and maybe even into spring.”
But is he disappointed to see what’s going on in Calgary right now? Calgary has been the exception to just about every housing rule just in the last few months, and the latest figures are no different. MLS sales in Calgary actually rose by a whopping 14.8 per cent when compared with September of last year. However, while the average national home price rose by 1.1 per cent, those in Calgary fell by about 0.9 per cent.
“Economic growth in Calgary has been stronger compared to many other regions in the country,” says Richard Cho, senior market analyst in Calgary for CMHC. “Thus far in 2012 employment in Calgary was up over 3.5 per cent while the Canadian average is 1 per cent. Provincial migration to Alberta has also been robust with net gains from nearly every region in the country. Many of the factors that support housing demand have grown in Calgary and have outperformed many other areas in Canada.”
But if you’ve begun to panic, stop. This is not a sign that our housing market is imploding, or that we’re about to face a U.S.-sized crash this side of the border. It is an indication that the new mortgage rules are working, and for this we should be thankful. Because if Jim Flaherty hadn’t shortened our rope, we might just have hung ourselves.
