CREA concerned about rising interest rates as we head into the fall market Image

CREA concerned about rising interest rates as we head into the fall market

By Newinhomes on Oct 16, 2018

The Canadian Real Estate Association released its monthly home sales figures for September 2018, reporting slight concern over rising interest rates and the mortgage stress test.

In September 2018, national home sales dropped 0.4% compared to August 2018, with the largest decreases in Vancouver Island, Edmonton, and parts of the Greater Golden Horseshoe. Year-over-year sales activity fell 8.9%.

While sales fell, new listings jumped 3% month-to-month, led by the Greater Toronto Area. On a national level, home inventory sat at 5.3 months at the end of September, which is in line with the long-term average.

With supply up and sales down, CREA is reporting that about three-quarters of Canada’s housing markets were balanced last month.

“The balance between the number of homebuyers and suitable homes varies depending on location, housing type and price range,” says CREA President, Barb Sukkau. “Differences in market balance will likely come into sharper focus as interest rates rise and cause this year’s new mortgage stress test to become even more restrictive. A professional REALTOR® is your best source for information and guidance in negotiating a purchase or sale of a home during these changing times.”

Rising interest rates

The national average price for sales in September 2018 remained mostly unchanged on a year-over-year basis, increasing 0.2% to $487,000. As usual, if you remove the GTA and Greater Vancouver from the equation, the average falls quite a bit down to $383,000.

“Sales activity may get all the press but it’s the balance between that and the number of homes for sale that sets the tone for pricing environment,” explains Gregory Klump, CREA’s Chief Economist. “In markets with an abundant supply of homes and slower sales activity, buyers have the upper hand when it comes to negotiations over price. However, in places where buyers are keen to make a purchase but there’s a shortage of homes for sale, sellers are in the driver’s seat when it comes to price. It will be interesting to see how supply and demand respond to rising interest rates amid this year’s new mortgage stress test.”

Apartment units had the greatest price growth, soaring 8.4% year-over-year. Townhomes followed with a 4.5% increase, and one- and two-storey single-family homes dropped 0.3%.

In the GGH, most markets saw price growth, except Barrie and District, which fell 3.6%. Guelph had the largest price increase, up 8%. Price growth in HamiltonBurlington jumped 6.1%, followed by Niagara Region (5.9%), the GTA (2%), and OakvilleMilton (1.4%).

September is supposed to be more active than the summer months. It will be interesting to see if rising interest rates combined with the stress test prevent buyers from entering the market throughout what is typically a busy season.

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