Home resale activity continued to be within a constructive range in Canada in November, remaining essentially flat from October and still up notably from a fairly weak level in November 2012. The latest batch of statistics released today by the Canadian Real Estate Association (CREA) is consistent with our view that the vigorous rebound in home resales since spring has largely run its course and that activity will stabilize near recent levels in the short term.
Following a seven-month stretch of monthly gains from March to September, and a 3.3% decline between September and October, November 2013 resales came in just 0.1% below the October tally. Resales in Canada still tracked higher than year-ago levels; however, the rate of increase moderated to 5.9% (from a recent high of 18.2% in September). The level of activity in November was essentially on par with the 10-year average (exceeding it marginally by 0.7%), thereby indicating that the market is sustaining a pace that is neither too hot nor too cold. On a year-to-date basis, home resales were effectively flat (edging 0.2% higher) from the same period last year, reflecting a very slow start to 2013.
At the national level and in the vast majority of local markets, demand-supply conditions continued to be balanced for the most part despite a 1.8% rise in new listings overall in Canada between October and November. Nonetheless, earlier tightening of market conditions in a number of markets (including Calgary and Toronto) this summer led to further acceleration in home price increases in November. The composite MLS HPI rose 4.1% from November 2012, representing the strongest annual gain since July 2012. Calgary and Toronto contributed most to this annual increase.
Faster-rising prices, while still reasonably contained at this stage, represent a risk to housing affordability if the current trend persists too long. We believe, however, that upward pressure will diminish in the period ahead as the earlier strength in homebuyer demand continues to partly unwind and that supply of homes (consisting increasingly of condos) available for sale continues to grow. We suspect that the run-up in resales during the summer and early fall included purchases made by many buyers who advanced their decision to buy in order to lock-in lower mortgage rates. We expect that some further modest pullback may occur in the months ahead as payback for sales that may have been advanced.
Till next time ...