Apart from British Columbia, the national home sales advanced for the sixth consecutive month in August and showed that Canada’s real estate was finally on a rebound. Forecasts say that real estate is will be on a purple patch for the next couple of years at least.
Latest statistics from CREA, or Canadian Real Estate Association had shown that the Canadian housing market was picking up and home sales in August rose by 5% compared to 1.4% since July. Also, the national average price climbed 3.9% year over year while the MLS Home Price Index showed an increase of 0.9% year over year growth and 0.8% month over month increase. CREA also declared that the transactions were now running almost 17% above the six year low that was hit in February.
The lower mortgage rates had also prompted CREA to revise its 2019 and 2020 forecasts and it projected an increase of 5% compared to 2018. The sales around this time were expected to reach 482,000 units and the average prices rose to 0.5% to $ 491,000. There was a decline of 0.6% in prices.
Other important details worth knowing
CREA had predicted that in 2020 there would be a rise of 7.5% climb in sales to 518,100 homes and the average prices went up to 2.1% to $ 501,400. A senior Economist from the Bank of Montreal said that a good job market and a steady population flow is to be noted in much of the country and there was a drop of 100 bps in five year fixed mortgage rates since late 2018. This momentum can be continued into the third quarter.
British Columbia, on the other hand, is expected to decline this year but it will rebound next year again. CREA predicts that there could be a 5.4% drop in home sales in BC this year but the market will recover by 14.3% in 2020. The home prices have largely stabilized in the past month in the region and number of homes sold rose from levels one year ago in the Lower Mainland.
What the authorities are attempting
The BC government was trying to temper the local market, according to some officials. There have also been efforts to cool the Vancouver real estate market for some time. The beginning of 2018 saw the federal bank regulator introduced a nationwide mortgage- qualification stress test and the homeowners had to prove that they would be able to pay off their mortgages and would be able to qualify for interest rate higher than the actual rate of interest in the contract. Such measures had also helped moderate the housing market.
The mortgage stress test has been eased marginally and helped some potential homebuyers but the extent to which they are adjusting to it will vary with the community and the price segment they are opting for. Vancouver is also slowly rebounding and the city had its first month over month seasonally adjusted increase in benchmark rates since March 2018. The sales went up by 51% and the market is balancing out but if the job market falters, then the correction might come to a halt.