Welcome Moderation in Canadian Housing Market - BMO Economics
TORONTO, ONTARIO–(Marketwire - Feb. 15, 2012) - While there has been growing concern over the possibility of a Canadian housing bubble, the facts on the ground send a much calmer message, according to a new report from BMO Economics on today’s release of Canadian existing home sales data for January.
“The housing market currently looks well balanced, and is broadly moderating on its own accord,” said Doug Porter, Deputy Chief Economist, BMO Capital Markets. “Seasonally adjusted sales dropped 4.5 per cent from the prior month in January, although they were still up 4 per cent from year-ago levels. In a similar vein, average prices rose a modest 1.2 per cent year-over-year following an even milder 0.7 per cent rise in December. The supply of existing homes for sale nudged back up in January, but remains unremarkable at 6 months, and the ratio of new listings to sales is also well within long-term norms.”
Mr. Porter noted that, on a regional basis, the biggest story is still Vancouver, although now it’s because activity in the city is slowing. “The 13.4 per cent year-over-year drop in sales in Vancouver is the largest in the country, and it is one of the few major centres where prices are down from last January. Just as a spike in high-end sales distorted the average to the high side early last year, weaker sales in that space are now skewing the overall results lower. On the flip side, Toronto remains the hottest big city, with solid sales gains and an increase of nearly 9 per cent in prices. There were eight cities with double-digit sales gains from a year ago, led by Saskatoon, Regina, Edmonton and Halifax.”
“Continued moderation is a welcome sign, and it bodes well for prospective homebuyers - particularly in a low interest rate environment,” said Katie Archdekin, Head of Mortgage Products, BMO Bank of Montreal. “However, irrespective of market conditions, homebuyers still need to ensure they are making financially responsible purchasing decisions.”
Ms. Archdekin added that Canadians looking to buy a home should consider a maximum amortization of 25 years, which will save homeowners thousands of dollars in interest costs over the life of the mortgage and ensure they can become debt-free faster.