Canadian Teranet Home Price Index has given us our first peak into Canadian housing activity in April. The index which tracks 11 major cities across Canada rose 4.4% year-over-year in April, following a 4.7% gain in March.
Teranet Home Price Index drives home the point that Canada housing really is a regional story. Canadian average existing home prices are on track to clock in at 5% to 6% in 2015, largely driven by Toronto and Vancouver. In contrast, Calgary home prices are expected to continue to weaken following a sharp 30% decline in existing home sales since the beginning of the year.
As the much anticipated spring market unfolds, Toronto and Vancouver home prices are expected to remain hot while other markets will likely catch the home-buying fever. The 5-year fixed mortgage rate bottomed in April and will likely continue to provide stimulus to the housing market through the summer months. For one, affordability in many regions is at an all-time best. But, more importantly, there may be a rush to jump into the market before borrowing rates go up. Longer-term government bond yields have already started to return to 2014 levels, which could push mortgage rates higher later this year.
"We continue to count on a slowing in home price growth, but likely not until we see sustained higher interest rates. More strength now will likely mean the impact of higher interest rates will be larger when they do eventually come." notes TD Economics
