Existing Home Sales Decline in January: Is This Setting up a Buyer’s Market?

January Home Sales Down in January

While the Canadian housing market remains robust, recent data show sales activity is slowing down. This could be setting up a buyer’s market as we near the busy spring selling season.

According to the Canadian Real Estate Association, home sales activity was down 3.1% in January on a month-over-month basis. Once again, Canadian housing data shows the major discrepancies between the different regions.

January sales were down in about 60% of all local housing markets. Provincially, the largest declines were felt in Alberta and Saskatchewan. In contrast, housing trends in the Maritimes continue to improve.

On the supply side, the number of newly listed homes increased 0.7%, led by Edmonton and the Greater Toronto Area, while Greater Vancouver, Calgary, and Regina posted the largest monthly declines in new listings. The number of months of inventory is an important supply and demand metric, and at the end of January, there were 6.5 months of inventory, the highest reading since April 2013.

Despite the increase in listings, prices remain stable. For example, in Edmonton, 666 homes were sold in the month of January; the lowest number in five years. At the same time, new listing increased about 30%, a five-year high. Selling prices haven’t really budged, though.

Regional Differences in Canadian Housing

Nationally, January housing prices, which lag sales, were 5.2% higher year-over-year. Two-storey single family homes posted the biggest year-over-year price gains (6.57%), followed by townhouse/row units (5.0%) and one-storey single family homes (4.61%). Apartment units, meanwhile, saw “modest” price growth of 3.11%.

Price gains in Calgary (7.76%), Greater Toronto (7.47%), and Greater Vancouver (5.53%) continued to post the biggest annual increases. Prices were also up in Fraser Valley, Victoria, and Vancouver Island and remained stable in Saskatoon, Ottawa, and Greater Montreal. Prices declined in Regina and Greater Moncton, however.

The national average price for homes sold in January 2015 was $401,143; this represents a year-over-year increase of 3.1%; the smallest increase since April 2013. The price, however, is skewed by sales activity in Greater Toronto and Greater Vancouver; excluding these two markets, the average price is $312,280; a year-over-year decline of 0.3%.

Mortgage Rate War Heats Up

Mortgage rates have been declining since the Bank of Canada made the surprise decision to cut interest rates on January 21 by a quarter of a percentage point to 0.75%. The Bank of Canada had held its benchmark rate at one percent since September 2010.

Low oil prices are negatively impacting the Canadian economy. And with prices expected to remain low for the near future, it is quite possible the Bank of Canada will reduce interest rates again when it next meets in March.

Today, Canada’s big banks are offering five-year fixed rate mortgages for around 3.0% and some of Canada’s smaller banks are offering the same product for as low as 2.5%. Rates are even lower for variable mortgages, with the big banks offering rates near 2.85%. But again, smaller lenders are offering better rates, some as low as 1.99%.

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Sources:

“Canadian home sales slip further in January,” Canadian Real Estate Association web site, February 17, 2015; http://www.crea.ca/canadian-home-sales-slip-further-january.

Mah, B., “Falling oil prices unnerve Edmonton home buyers and sellers, but little sign of major downturn yet,” The Edmonton Journal , February 22, 2015; http://www.edmontonjournal.com/