Existing home sales rose 0.9% month-on-month in August – the 4th straight monthly gain. The increase builds on July’s upwardly revised 3.0% gain (was 1.9%). Sales were higher in about half of all local markets in August, with solid gains in Toronto (+2.2%), Montreal (+2.8%) and Edmonton (+5.4%). On the flipside, sales were lower in Halifax (-8.2%), London (-1.2%) and Winnipeg (-1.0%).
In an encouraging bit of news, activity picked up in several markets in B.C. For instance, sales were up 2.9% in Vancouver – the first gain this year. Gains were posted in Fraser Valley (+0.6%), Okanagan-Mainline (+1.7%), and Victoria (+2.7%).
New listings were unchanged in August, as gains in the GVA (+4.0%) and Montreal (+3.8%) were offset by declines in the GTA (-1.6%) and Winnipeg (-7.7%).
With new listings unchanged and sales rising, the sales-to-new listings ratio edged up to 56.6 in August – consistent with a balanced market, although up from a low of 51.2 in May and coming closer to seller’s market territory. Provincially, the ratio was highest in New Brunswick (63.4), followed by Quebec (62.3) and PEI (61.7). Conversely, the ratio was lowest in Saskatchewan (38.8), Alberta (46.2) and Newfoundland and Labrador (34.2) – indicating loose conditions in these markets. In Ontario, the ratio increased to 61.5, its highest level since January. The ratio also increased to 52.5 in B.C.
The average home price rose for the fifth straight month in August (+1.0%). It was also 1.0% higher on a year-over-year basis – an improvement compared to the 0.6% year-over-year gain recorded in July.
The quality-adjusted MLS home price index was up 2.5% from a year-ago, marking an acceleration from July’s 2.2% gain. Quality-adjusted prices were higher in most markets. Once again, the Prairies were the exception, with markets in Saskatchewan and Alberta dealing with oversupplied conditions. Price growth remained strong in Ottawa (+7.2% y/y) and Montreal (+5.9%), lifted by tight market conditions. Prices were higher in the GTA (+1.4% y/y) – marking the first such gain since February. In the GVA, price growth decelerated to its softest pace since 2014 (+4.1% y/y). In Fraser Valley, prices were up 11% – still strong, but marking the slowest growth since 2015.
Key Implications
It’s clear that housing markets are moving past the B-20 induced weakness earlier in the year. Questions now centre on the path of the recovery going forward. Our view is that sales and prices will continue to grow, but that rising borrowing costs will restrain the pace of expansion. This is particularly true for more expensive markets in Ontario and B.C. where affordability pressures are acute.
Encouragingly, there were signs in August in B.C.’s market is bottoming out after a period of weakness. It’s been several months since the implementation of provincial policy measures in B.C., leaving markets with plenty of time to adjust. While one month of data hardly makes a trend, August’s performance could be a sign that the worst is over for the province.
From the standpoint of overall economic growth, rising resale activity should ensure that residential investment adds to third quarter GDP after subtracting, on average, in the prior two quarters.
