Canada’s existing home sales fall sequentially in June, likely to decline by 2.1 pct next year – TD Economics

Canada’s existing home sales dropped in June. On a sequential basis, existing home sales fell 6.7 percent, marking a third straight fall. Sales activity dropped 14.1 percent from the peak reached three months earlier and 11.6 percent below year ago levels.

Existing home sales dropped widely throughout the nation; however, the losses were greatly led by Ontario markets. Existing home sales dropped 15.1 percent in Toronto, a second straight double-digit fall, with resale activity now down 42 percent from the peak reached in March. Sales were also down in B.C. as the rebound in Vancouver petered out, with home sales down 4 percent in June and 29 percent below their peak February 2016 levels, noted TD Economics in a research report. Excluding Ontario and B.C., sales were down a more modest 3.9 percent sequentially.

New listings dropped 1.5 percent sequentially in June; however, this was not sufficient to compensate for the sales drop, leading market conditions to rebalance further throughout the nation. After peaking at about 68 percent in February the sales-to-listings ratio has dropped to 52.8 percent, close to the mid-point of the 40 percent to 60 percent typically considered as balanced market conditions.

While markets in Ontario and B.C. continue to be the tightest markets throughout the nation with well under three months’ of inventory, Toronto is weakening the fastest.

The housing market of Canada is now in its third month of its soft landing. The softness was set off by changes to provincial and federal housing policy; however, it would will ultimately be higher interest rates that help strengthen it. Mortgage rates have move together with the Bank of Canada rate hike last week and would possibly continue to edge higher with three further rate hikes expected by the end of 2018, stated TD Economics.

In all, after rising by almost 6.5 percent in 2017, existing home prices are likely to fall by 2.1 percent in 2018. Most of that softness would be concentrated in markets in B.C. and Ontario, where households are especially sensitive to higher mortgage rates given the stretched affordability. Meanwhile, rebounding economic conditions should aid in countering some of the effect of gradual hikes in interest rate, with home prices and sales likely to trend higher, added TD Economics.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 23.6555, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -83.9328. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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