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October Home Prices Up 3.4% From A Year Earlier
The Teranet-National Bank National Composite House Price Index™ for October was up 3.4% from a year earlier, for an 11th consecutive month of deceleration in 12-month inflation. Up through September this cross-country trend was replicated in the Vancouver market, but in October this was no longer the case. In Montreal 12-month inflation has decelerated in 10 of the last 11 months, in Toronto in each of the last six months, in Winnipeg in each of the last four months. Twelve-month price changes continue to vary widely. In October the 12-month gain exceeded the national average by a wide margin in four metropolitan areas: Halifax (8.9%), Hamilton (7.2%), Toronto (6.4%) and Winnipeg (5.9%). In Montreal (3.6%) and Calgary (3.5%), it was close to the national average. In Quebec City and Edmonton the 12-month rise was 2.6% and in Ottawa-Gatineau it was 2.5%. Prices were down from a year earlier in Vancouver (−1.0%) and Victoria (−1.7%).
Canadian home affordability rises
Royal Bank says the cost of home ownership became more affordable in the most recent quarter due to a modest decline in home prices and gains in Canadian household incomes.
RBC’s affordability index for a detached bungalow stood at 42 per cent of income nationally in the second quarter.
That means an owner would need to spend 42 per cent of pre-tax annual income to pay for mortgage payments, utilities and property taxes — one percentage point lower than in the third quarter of 2011.
The index fell even more for two-storey homes, by 1.2 percentage points to 47.8 per cent and eased 0.6 percentage points to 28 per cent for condos.
The bank, which publishes the index on a quarterly basis, says ultra low interest rates have been the key factor in keeping affordability levels from reaching dangerous levels in recent years.
Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages.
RBC notes that Canada’s housing market cooled further in the third quarter, partially because of the effects of a fourth round of rule changes to government-backed mortgage insurance.
The bank expects the negative effect of the changes on home sales will ease by the end of the year and that resale activity will stabilize next year.
2-year trend flat
The July-September quarter fully reversed the mild erosion in affordability that occurred during the first half of 2012, said RBC chief economist Craig Wright.
“The broad affordability picture has been somewhat stationary over the last two years, alternating between periods of improvement and deterioration, resulting in an affordability trend that is, on net, essentially flat,” Wright said.
Wright expects the Bank of Canada to begin raising its overnight lending rate for banks —which affects bank’s prime lending rates — from the current one per cent in the second half of next year, assuming the euro crisis remains in check and U.S fiscal issues are addressed.
“The cost of owning a home took a smaller bite out of household pocketbooks in the third quarter as home prices fell — most notably in the Vancouver area, though it remains the least affordable market in Canada by a wide margin,” explained Wright.
The index in Vancouver stood at 83.2 per cent of income, followed by Toronto at 52.4 per cent, Montreal 40.2 per cent, Ottawa at 38.7 per cent, Calgary at 38.3 per cent and Edmonton at 31.1 per cent.
Canadian resale housing activity stable in October
According to statistics released on November 15, 2012 by The Canadian Real Estate Association (CREA), national home sales activity and average price were little changed in October 2012.
Highlights:
• Home sales little changed (-0.1%) from September to October.
• Actual (not seasonally adjusted) activity down 0.8% from October 2011.
• Number of newly listed homes down 3.8% from September to October.
• Market remains firmly in balanced territory.
• National average home price unchanged (+0.02%) on a year-over-year basis.
• MLS® HPI up 3.6% in October – smallest gain since May 2011.
The number of home sales processed through the MLS® Systems of Canadian real estate Boards and Associations was little changed in October 2012 compared to the previous month (-0.1 per cent) and remains below levels reported in the first half of the year.
Sales activity improved in about half of all local markets as compared to September, including Greater Vancouver and Greater Toronto. However, in keeping with the national trend, transactions there remain well below levels posted in the first half of the year.
On a year-over-year basis, actual (not seasonally adjusted) activity was also little changed, down 0.8 per cent from levels recorded for October of last year. Led by Calgary, sales were up compared to levels one year ago in almost two-thirds of all local markets. Sales remained below year-ago levels in Greater Toronto, Greater Vancouver, and Greater Montreal.
“Sales data in October held steady at the national level, but we are seeing some diverging trends among local housing markets,” said CREA President Wayne Moen. “Markets in Alberta and Saskatchewan are gaining strength, while some of Canada’s traditionally most active markets have lost steam. As always, all real estate is local, so buyers and sellers should talk to their REALTOR® to understand how the housing market is shaping up where they live or might like to live.”
“Little has changed since national activity geared down in the wake of mortgage rules that came into force in July,” said Gregory Klump, CREA’s Chief Economist. “Opinions differ about how sharply sales have slowed depending on the local housing market.”
“These results suggest that the Canadian housing market overall has returned to a more sustainable pace,” added Klump.
A total of 402,322 homes have traded hands via Canadian MLS® Systems over the first 10 months of 2012, up 0.8 per cent from levels reported over the same period last year and 0.4 per cent below the 10-year average for the period.
Originally Published By Mike Mattiaci, Novemeber 27th 2012
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