The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations for 2014 and 2015.

Extraordinarily bleak winter weather made for a slow start to 2014 national sales activity. As the first quarter ended, sales momentum heading into spring was constrained by a continuing shortage of listings in a number of local markets. The rise in newly listed properties in April and May supported an increase in sales activity.

The deferral of sales and listings reflects a delayed start to the spring home buying season, with combined sales for the period from March to May coming in largely as anticipated and at average levels. These deferrals are now likely to have been largely depleted, which suggests that the strength of sales momentum heading into the summer may be transient.

CREA’s forecast for sales activity in 2014 is largely unchanged from its previous forecast published in March. At that time, interest rates had been expected to start to edge higher in the second half of the year. However, it now appears that interest rates may not begin to rise until closer to the end of the year, which remains supportive for home ownership affordability over the balance of 2014.

Sales are forecast to reach 463,400 units in 2014, representing an increase of 1.2 per cent compared to 2013. This is little changed from CREA’s forecast of 463,700 sales (rising 1.3 per cent) published in March.

Activity is still expected to remain in line with its 10‐year average and to hold within fairly short reach of 450,000 units for the seventh consecutive year (Chart A).

British Columbia is forecast to post the largest year‐over‐year increase in activity (8.3 per cent), and make the biggest contribution to the increase in national sales activity. B.C.’s projected increase in sales this year largely reflects a slow start to 2013.

Alberta’s annual sales are projected to rise by +3.8 per cent increase in 2014, while activity in Saskatchewan, Manitoba, and Ontario is expected to be roughly in line with 2013 levels. Sales are forecast to fall by 1.7 per cent and Quebec, 4.2 per cent in New Brunswick in 2014, 5.1 per cent in Nova Scotia, and by 2.6 per cent in Newfoundland and Labrador.

In 2015, the outlook for the economy, jobs and incomes is one of further improvement, accompanied by a slow and gradual increase in fixed and variable mortgage interest rates.

On balance, these two opposing factors should most benefit housing markets where sales are currently softer but prices remain more affordable. Sales in relatively less affordable housing markets are likely to be more sensitive to higher fixed mortgage rates, whether from the standpoint of higher monthly mortgage payments or qualification for mortgage financing based on the posted five‐year mortgage interest rate.

As such, provinces east of Ontario are expected to post the largest gains in activity in 2015 in the range of around 2.5 to five per cent, while sales in provinces from British Columbia to Ontario are forecast to remain little changed.

National activity is now forecast to reach 467,800 units in 2015, representing a further annual increase of 0.9 per cent. This would result in sales staying in line with the 10‐year average for the eighth year in a row.

Average prices have remained firm and continue to reflect a rise in the share of national sales among some of Canada’s most active and expensive markets compared to last year. Additionally, prices have been heating up in some markets, particularly in Calgary and Toronto where single family properties remain in short supply.

The national average home price is now projected to rise by 5.7 per cent to $404,300 in 2014, with similar sized gains in British Columbia, Alberta, and Ontario. More modest changes in average prices are forecast for all other provinces this year. The national average price is forecast to edge up a further 0.7 per cent in 2015 to $407,300. Alberta and Manitoba are forecast to post average price gains of two per cent in 2015, followed closely by Ontario at 1.2 per cent. Average prices in all other provinces are forecast to remain stable, edging up by less than one percentage point.

Ottawa, ON, June 16, 2014 - According to statistics released today by The Canadian Real Estate Association (CREA), national home sales activity posted a sizeable month-over-month increase in May 2014.

Highlights:

• National home sales rose 5.9% from April to May.
• Actual (not seasonally adjusted) activity stood 4.8% above May 2013 levels.
• The number of newly listed homes climbed 3.8% from April to May.
• The Canadian housing market remains in balanced territory.
• The national average sale price rose 7.1% on a year-over-year basis in May.
• The MLS® Home Price Index (HPI) rose 5.0% year-over-year in May.

The number of home sales processed through the MLS® Systems of Canadian real estate Boards and Associations rose 5.9 per cent from April to May 2014. This marks the largest month-over-month increase in nearly four years.

Sales rose in four out of every five local housing markets in May, including almost all large urban markets. The largest gains driving the national increase were posted in Calgary, Greater Toronto and Montreal.

“The monthly increase in May activity was widespread among local housing markets, with some 80 per cent of them reporting stronger sales compared to April,” said CREA President Beth Crosbie. “Over the past 25 years, that widespread a monthly sales increase has been recorded only a handful of times. Even so, the improvement varied by location. Your local REALTOR® is your best source of information about the factors driving the market where you currently live or might like to in the future.”

Actual (not seasonally adjusted) activity in May stood 4.8 per cent above levels reported in the same month last year, and 3.8 per cent above the 10-year average for the month of May.

May sales were up from year-ago levels in about 60 per cent of all local markets, led by Greater Vancouver, Fraser Valley, Calgary, and Greater Toronto. Monthly activity trailed levels reported last May in Montreal and Halifax-Dartmouth.

The national trend for new listings has mirrored the trend for sales in recent months. The number of newly listed homes rose 3.8 per cent in May, marking a fourth straight monthly gain. Also in line with sales activity, new listings were up in about 80 per cent of local markets.

“In markets where supply had become tight, we expected sales to improve in tandem with listings,” said Gregory Klump, CREA’s Chief Economist. “Had it not been for such a brutal winter that delayed the launch of the spring market, the improvement in new listings and sales would likely have been more spread out over the past few months.” Combined sales over the past three months are roughly in line with the 10-year average for that three month period.

The national sales-to-new listings ratio was 53.1 per cent in May, up from 52.0 per cent in March and April but still well entrenched within the 40 to 60 per cent range that marks balanced market territory. Nearly 60 per cent of all local markets posted a sales-to-new listings ratio in this range in May.

The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

The number of months of inventory has firmed slightly since the beginning of 2014. There were 6.0 months of inventory nationally at the end of May 2014 compared with 6.5 months at the beginning of the year. Nonetheless, as with the sales-to-new listings ratio, the number of months of inventory continues to suggest that Canada’s housing market is generally well-balanced, with year-over-year price growth varied among local housing markets tracked by the index, with the biggest gains having been posted by Calgary (+10.12 per cent), Greater Toronto (+7.08 per cent), and Greater Vancouver (+4.27 per cent).

The actual (not seasonally adjusted) national average price for homes sold in May 2014 was $416,584, up 7.1 per cent from the same month last year.

The national average price continues to be skewed upward by sales activity in Greater Vancouver and Greater Toronto, which are among Canada’s largest and most expensive housing markets. Excluding these two markets from the calculation, the average price reaches a relatively more modest $336,373 while the year-over-year increase shrinks to 5.3 per cent.

The MLS® Home Price Index (MLS® HPI) provides a better gauge of price trends because it is not affected by changes in the mix of sales activity the way that average price is.

The Aggregate Composite MLS® HPI was up by 4.98 per cent year-over-year in May, which is slightly smaller than gains of 5.03 per cent and 5.19 per cent in April and March respectively.

Year-over-year price growth gained strength for two-storey single family homes and townhouse/row units, and lost a bit of momentum for one-storey single family homes and apartment units.

Year-over-year price gains were led by two-storey single family homes (+5.98 per cent), followed closely by price increases for one-storey single family homes (+5.19 per cent) and townhouse/row units (+5.04 per cent). The price increase for apartment units was comparatively more modest (+2.93 per cent).

Year-over-year price growth varied among local housing markets tracked by the index, with the biggest gains having been posted by Calgary (+10.12 per cent), Greater Toronto (+7.08 per cent), and Greater Vancouver (+4.27 per cent).
 

– 30 –

PLEASE NOTE: The information contained in this news release combines both major market and national sales information from MLS® Systems from the previous month.

CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas. Statistical information contained in this report includes all housing types.

MLS® Systems are co-operative marketing systems used only by Canada’s real estate Boards to ensure maximum exposure of properties listed for sale.

The Canadian Real Estate Association (CREA) is one of Canada’s largest single-industry trade associations, representing more than 111,000 REALTORS® working through some 90 real estate Boards and Associations.

Further information can be found at http://crea.ca/statistics.