Market Watch - Lending conditions weigh on housing demand

The impacts of rising lending rates and stricter qualification levels are showing its toll on the Real Estate Market and causing demand to ease across all housing types.

However, Homeownership remains a sound long-term investment. Unfortunately, many home buyers are still finding it difficult to secure a home that meets their needs. In a recent Canadian Centre for Economic Analysis study undertaken by the Toronto Real Estate Board, it was found that many people are over-housed. These people don't list their homes for sale, because they feel there are no alternative housing types for them to move into. Policymakers need to focus more on the 'missing middle' – home types that bridge the gap between detached houses and condominium apartments.

Ontario - rising lending rates and stricter qualification levels is showing its toll on the Market

Toronto, June 4, 2018 -- Greater Toronto Area REALTORS® reported 7,834 sales through TREB's MLS® System in May 2018. This result was down by 22.2% compared to May 2017. While the number of sales was down year-over-year, the annual rate of decline was less than reported in February, March and April, when sales were down by more than 30%. On a month-over-month basis, seasonally adjusted May sales were basically flat compared to April.

Supply of homes available for sale continued to be an issue. New listings were down by 26.2%. The fact that new listings were down by more than sales in comparison to last year means that competition increased between buyers. Recent polling conducted by Ipsos for TREB suggests that listing intentions are down markedly since the fall.

"Homeownership remains a sound long-term investment. Unfortunately, many home buyers are still finding it difficult to secure a home that meets their needs. In a recent Canadian Centre for Economic Analysis study undertaken by the Toronto Real Estate Board, it was found that many people are over-housed in Ontario, with over five million extra bedrooms. These people don't list their homes for sale, because they feel there are no alternative housing types for them to move into. Policymakers need to focus more on the 'missing middle' – home types that bridge the gap between detached houses and condominium apartments," said Mr. Syrianos.

The MLS® Home Price Index (HPI) Composite Benchmark was down by 5.4% year-over-year. The average selling price for all home types combined was down by 6.6% to $805,320. On a seasonally adjusted basis, the average selling price was up by 1.1% compared to April 2018.

"Market conditions are becoming tighter in the Greater Toronto Area and this will provide support for home prices as we move through the second half of 2018 and into 2019. There are emerging indicators pointing toward increased competition between buyers, which generally leads to stronger price growth. In the City of Toronto, for example, average selling prices were at or above average listing prices for all major home types in May," said Jason Mercer, TREB's Director of Market Analysis.

Ottawa, June 5, 2018 -- Members of the Ottawa Real Estate Board sold 2,279 residential properties in May through the Board’s Multiple Listing Service® System, compared with 2,294 in May 2017, a decrease of 0.7%. The five-year average for May sales is 2,041. May’s sales included 485 in the condominium property class and 1,794 in the residential property class.

“Although our overall inventory stock is down in both the residential and condo market, the number of listings coming onto the market this month is typical spring activity,” states Ralph Shaw, President of the Ottawa Real Estate Board. “The sheer number of home sales that took place in May indicates that inventory is turning over quickly– certainly a sign that Ottawa is a healthy real estate market.”

The average sale price of a residential-class property sold in May in the Ottawa area was $464,401, an increase of 6.3% over May 2017. The average sale price for a condominium-class property was $281,247, an increase of 3.4% from May 2017.*

“In the first five months of 2018, the value of a single-family home has increased about 8% and approximately 6.5% for condominiums,” Shaw notes. “This price acceleration is encouraging news for homeowners who have now seen an average of 3% price growth per year for the last five years.”

“Much of the total increase in property values have been experienced since the beginning of this year. Not only will this help new homebuilders validate their pricing since construction costs and development fees are so high, but it also will give baby boomers incentive to sell their homes which will help put inventory back onto the market,” he explains.

“While our inventory stays at historically low levels, especially in some neighbourhoods, there will continue to be upward pressure on home prices. We definitely have the demand for housing in this city not only because it is still very affordable but because all the fundamentals are solid here. However, our city does need to have a longer-term housing supply strategy so that we aren’t confronted with future affordability challenges,” Shaw advises.

The $300,000 to $449,999 range remains the most active price point in the residential market, accounting for 45% of home sales, while the $500,000 to $750,000 range continues to gain momentum, now representing almost one-quarter of residential home sales.

“Between $150,000 and $249,999 was May’s most active price point in the condominium market, accounting for 49% of the units sold,” Shaw reports. “Moreover, apartment condos represent 52% of the sales. This is likely a reflection of the low vacancy rate in the rental market. If you can scrape together a down payment, the carrying costs of one of these condos should be less than renting,” he suggests.

In addition to residential and condominium sales, OREB Members assisted clients with renting 1,020 properties since the beginning of the year.

Alberta - Lending conditions weigh on housing demand

City of Calgary, June 1, 2018 – May sales activity continues to ease with the largest declines occurring in the detached sector. Additional gains in new listings continue to increase inventory levels.

City-wide sales activity in May totalled 1,726 units and is 19% below last years' levels. This is 24% below longer-term averages. Sales activity in the detached sector declined to levels not seen in over a decade.

"The impact of rising lending rates and stricter qualification levels is causing demand to ease across all product types," said CREB® chief economist Ann-Marie Lurie.

"Economic conditions have improved compared to several years ago, but the pace of economic recovery has not been enough to outweigh the changes in lending conditions."

Market supply has not adjusted to sales activity and is pushing months of supply to 4.9 months. Elevated supply relative to demand prevented any further price recovery in the market and city-wide residential benchmark prices totalled $436,900 in May. This is similar to last month and 0.6% below levels recorded last year.

Detached sales and inventories have risen across all price ranges, but the amount of excess supply has been most notable for homes priced above $500,000. Months supply for the higher price ranges remains high compared to the past several years. However, they still remain below record levels that occurred post-financial crisis (2008 – 2009).

"The changes in the lending market are preventing some people from moving up in the market. Uncertainty has also caused others to wait on making changes to their housing situation," said CREB® president Tom Westcott. 
"However, there are pockets of the market that have not seen the same supply increase. It makes it so important to understand the dynamics of your community."

British Columbia - Home buyer demand continues to decline across the Metro Vancouver* housing market.

Vancouver, June 01, 2018 -- The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in the region totalled 2,833 in May 2018, a 35.1% decrease from the 4,364 sales recorded in May 2017, and a 9.8% increase compared to April 2018 when 2,579 homes sold.

Last month’s sales were 19.3% below the 10-year May sales average.

“With fewer homes selling today compared to recent years, the number of homes available for sale is rising,” Phil Moore, REBGV president said. “The selection of homes for sale in Metro Vancouver has risen to the highest levels we’ve seen in the last two years, yet supply is still below our long-term historical averages.”

There were 6,375 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in May 2018. This represents a 5.5% increase compared to the 6,044 homes listed in May 2017 and a 9.5% increase compared to April 2018 when 5,820 homes were listed.

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 11,292, a 38.2% increase compared to May 2017 (8,168) and a 15% increase compared to April 2018 (9,822).

The total number of listings available today is 17.2% below the 10-year May average.

For all property types, the sales-to-active-listings ratio for May 2018 is 25.1%. By property type, the ratio is 14.7% for detached homes, 30.8% for townhomes, and 41.7% for condominiums.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below the 12% mark for a sustained period, while home prices often experience upward pressure when it surpasses 20% over several months.

“For home sellers to be successful in today’s market, it’s important to price your property competitively given the shifting dynamics we’re experiencing,” Moore said. “It’s also important to work with your local Realtor to better understand these changing conditions.”

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,094,000. This is an 11.5% increase over May 2017 and a 0.2% increase compared to April 2018.

Sales of detached properties in May 2018 reached 926, a 40.2% decrease from the 1,548 detached sales recorded in May 2017. The benchmark price for detached properties is $1,608,000. This is a 2.4% increase from May 2017 and a 0.1% increase compared to April 2018.

Sales of apartment properties reached 1,431 in May 2018, a 29.3% decrease from the 2,025 sales in May 2017. The benchmark price of an apartment property is $701,700. This is a 20.2% increase from May 2017 and a 0.1% increase compared to April 2018.

Attached property sales in May 2018 totalled 476, a 39.8% decrease from the 791 sales in May 2017. The benchmark price of an attached unit is $859,500. This represents a 16% increase from May 2017 and a 0.6% increase compared to April 2018.