The Canadian Real Estate Association released its national home sales results for December 2018, marking the fourth consecutive monthly decline in sales activity.
National home sales fell 2.5% from November to December 2018, ending the year with annual sales nearly 12% below the 10-year average. On a year-over-year basis, sales fell 19%. This big dip is reflective of the spike in home sales seen in December 2017, when buyers were trying to get in before the stress test came into effect.
“What a difference a year makes,” says CREA President, Barb Sukkau. “Sales trends were pushed higher in December 2017 by homebuyers rushing to purchase before the new federal mortgage stress test took effect at the beginning of 2018. Since then, the stress test has weighed on sales to varying degrees in all Canadian housing markets and it will continue to do so this year. All real estate is local. A professional REALTOR® remains your best source for information and guidance in negotiating the purchase or sale of a home during these changing times.”
As of the end of December 2018, national inventory came in at 5.6 months, slightly above the long-term average of 5.3 months. Since you frequently read headlines and articles about how certain markets in Ontario are in need of supply, the national supply level may look good, but it’s important to remember how different Canadian housing markets are across the country. For example, the Prairie provinces have too many homes on the market, while Ontario’s demand is outpacing supply.
“The Bank of Canada recently said that it expects housing activity will stay ‘soft’ as households ‘adjust to the mortgage stress test and increases in mortgage rates,’ even as jobs and incomes continue growing,” says Gregory Klump, CREA’s Chief Economist. “Indeed, the Bank’s economic forecast shows it expects housing will undermine economic growth this year as the mortgage stress test has pushed homeownership affordability out of reach for some home buyers.”
The national average sale price dropped nearly 5% year-over-year down to just over $472,000. If you take the Greater Toronto Area and Greater Vancouver out of the equation, the average price drops to just under $375,000.
When it comes to housing types, apartments had the greatest year-over-year price gain, jumping 4.9%. Townhomes followed with a 3.1% increase. The average price of a two-storey single-family home remained relatively unchanged, increasing 0.4%, while one-storey single-family homes dropped 0.3%.
In the Greater Golden Horseshoe, Guelph and Niagara Region experienced the greatest price growth, each increasing 6.8%. Hamilton-Burlington followed closely with a 6.4% increase. Oakville-Milton and the GTA both saw price growth of about 3%. The only area in the GGH reported by the CREA to experience a drop in price growth was Barrie and District, which fell 1.1%.
A year after the stress test kicked in, it’s still making headlines as a key factor in the cooling of the country’s housing market. We’re interested to see if the stress test regulations remain the same throughout 2019 or whether it is adjusted to accommodate the changing market.