Canada’s existing home sales fall again in July, housing affordability likely to deteriorate

Canada’s existing home sales dropped on sequential basis in July. The sales fell 2.1 percent on the month, a fourth straight monthly decline. Existing home sales are now 15.3 percent below the peak reached in March of this year.

The drop was widespread with sales falling in two thirds of all markets throughout Canada. But the biggest declines continued to be in the Greater Golden Horseshoe, led by an additional 5.4 percent contraction recorded in the Toronto market where sales have now dropped 44 percent from the peak in March. The only major markets to record a rise in July were Winnipeg, Quebec City, Hamilton, Montreal, Regina and Edmonton.

New listings also dropped in the month, but by a lesser 1.8 percent. This aided in keeping the market properly balanced. The sales-to-new listings ratio remained at 53.6 or close to the midpoint of where CREA implies a balanced market. New listings in Toronto have dropped back to historically normal levels after a huge spike between April and June; however, the market has stayed comparatively weak with several homes listed during that period still lingering on the market, noted TD Economics.

By the sales-to-new listings measure, Toronto is one of the weakest markets in Canada. Newfoundland and Saskatoon are two other markets where supply-demand balances are skewed more in favour of buyers.

The average home price dropped 0.8 percent year-on-year. This is mainly because demand is shifting away from the more expensive Toronto and Vancouver markets. Home prices continue to grow moderately in most regions along with balanced conditions. The quality adjusted MLS home price index was still growing at the most rapid rate in markets throughout the Greater Golden Horseshoe with home prices still rising 18.1 percent year-on-year in the Greater Toronto Area; however, the rate of growth is moderating rapidly. Home prices continued to increase in markets in B.C, with prices rising 17.8 percent year-on-year in Victoria and 8.7 percent in Greater Vancouver Area. Home price growth is also rising in Ottawa and the Great Montreal Area after a sustained period of below 2 percent growth.

The soft data of Canada’s housing market in July is expected to be a soft landing, with increasing mortgage rates and stricter mortgage regulation holding demand back widely throughout Canada. Mortgage rates are likely to continue rising with the Bank of Canada expected to raise its policy rate three times in the next year and a half, noted TD Economics. Housing affordability is expected to deteriorate widely throughout Canada, added TD Economics.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 31.7273, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 104.101. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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