Toronto Dominion Economic Outlook November 2012

TD Economics



Data Release: The slowdown in the Canadian resale housing market prevails

  • National home sales slipped on a month-over-month basis in October by 0.1%. A decline has now been posted in seven of the last ten months. The slowdown in sales is more noticeable on a year-over-year basis: this metric is down 0.8%.
  • With listings edging down more than sales, the sales-to-listings ratio increased to 51%. To recall, a ratio between 40% and 60% range is indicative of fairly balanced market conditions. 
  • The number of months of inventory of unsold homes rests at 6.5 months. The national housing market has hovered around the six month mark since late-2010.
  • The average residential home price increased by just 0.02% year-over-year. With the modest dip, the average home price in Canada, on a non-seasonally adjusted basis, is approximately $361,516. 
  • The MLS® home price index is less distorted by the composition of sales. By this measure, prices remain up by 3.6% when compared to October 2011. However, these gains have significantly decreased relative to where early-2012. The October gain is also the smallest posted since May 2011.


Key Implications

  • Housing market trends in Canada for 2012 can be characterized as before and after regulatory changes. In the first half of the year, sales and price gains were modest, but positive. More stringent mortgage rules and tighter mortgage underwriting rules have 'purposely' knocked the wind out of the housing market sails.
  • While regulation is having the intended impact on the housing market, it typically has only temporary staying power. The cool down we are currently experiencing should be lifted in early-2013. What happens thereafter is less certain. The low interest rate environment could pull homeowners back onto the market, causing home prices to once again trek upwards. Alternatively, an absence of pent-up demand may leave the market in a bit of a lull until interest rate hikes resume in late-2013. Under either scenario, it is safe to say that there is a low probability of out-sized home price gains over the near-term.
  • It is commonly said that there is no such thing as a national housing market. This is especially true given the regional differentiation present in Canada. Greater Vancouver is already in the middle of its housing adjustment - the market had simply gone too far too fast and is now pulling back. In the last few months, the Greater Toronto Area has been losing its lustre. Other areas like Calgary and Edmonton continue to post price gains so far in 2012. No region will be immune from the macroeconomic trends and regulatory developments. That being said, the impacts to be felt will depend on location, location and location.

Sonya Gulati, Senior Economist

Leo Manchisi

Leo Manchisi

CENTURY 21 Miller Real Estate Ltd., Brokerage*
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