We just talked this morning about how Canada’s housing market is not headed for a U.S.-style crash by any means. But there’s no doubt that Benjamin Tal wasn’t wrong when he said that the situation right now isn’t good by any stretch. And while you might not want to hold your breath waiting for an implosion, a look at the numbers in one of the hottest markets, Toronto, shows that the soft landing everyone has been talking about has now begun to happen.
As you can see from the above chart, Toronto home sales were down last month from October of last year; although they did experience a slight increase from this past September. And while the numbers may show that there was only a 7.1 per cent difference from October of 2011, the MLS Index shows a difference of double that, with last month’s home sales in Toronto being 15.6 per cent lower than October of 2011. This index is thought to be much more accurate, “comparing apples to apples,” and taking into consideration that there were two more business days in October 2012 than there were in October 2011.
While sales for October 2012 did not see the significant decreases that were seen in the prior month, the lower numbers in both September and October have been said to have been a result of the stricter mortgage rules that went into effect this past summer. And while Deputy Minister of Finance, Michael Horgan, said last week that it was too early to tell whether or not the mortgage rules have had any real effect on the housing and mortgage markets, it would certainly seem that they have.
Ann Hannah, president at the Toronto Real Estate Board, certainly thinks so. She says,
“Sales have decreased in the second half of this year compared to 2011, especially since the onset of stricter mortgage lending guidelines at the beginning of July. The prospect of higher monthly mortgage payments due to the reduced maximum amortization period has prompted some households to delay their home purchase.”
One trend that hasn’t changed, as you can see from the chart above, is that home prices continue to climb even though sales are faltering. The average selling price for all homes in October 2012 was $503,479, up 6.2 per cent from a year ago. The MLS Home Price Index though, showed a slightly smaller increase at 5.1 per cent. Sales of detached homes in particular, increased 5 per cent, moving these homes up to $779,484 in the downtown core; and up 8 per cent in the 905 area to $573,598.