Canada to experience weak housing activity next year

Canada's existing home sales fell 2.1% m/m in September and were up just 0.7% from year ago levels. However, sales are still elevated relative to historical norms and it was the second best September on record for homes sales. Listing also fell by 2%, holding the sales-to-listings ratio steady at 56.8% - in balanced territory.

Canada's housing markets stats are consistent with a continued hot housing market in September. It just doesn't appear to be getting any hotter. This underscores our view that the highly simulative impact of lower mortgage rates at the start of this year would wear out by September/October. 

"A favourable economic backdrop and balanced market conditions will continue to support a moderate pace of housing activity in most markets across Canada. The exceptions include Calgary, Edmonton, Regina and Saskatoon where sustained low oil prices are likely to lead to weak housing activity through the rest of 2015 and first half of 2016. Existing home sales are already down 34% from year ago levels in Calgary", argues  TD Economics.

Moreover, average existing home prices are likely to be held back by a shift towards more affordable types of housing and regions. 

"Therefore, more emphasis should be placed on the MLS quality adjusted home price index. With some bigger markets remaining relatively tight, we should continue to see more upward pressure on quality adjusted prices through the rest of 2015", states TD Economics.