Photo: James Bombales
Industry players often grumble that the media pays too much attention to flashy figures, without providing a broader context for what’s happening in the market.
One month doesn’t equal a trend
But it’s still too soon to say, according to Canadian Real Estate Association (CREA) chief economist Gregory Klump.
“One car doesn’t make a parade,” Klump told Livabl. “This increase is a welcome step in the right direction, but we can’t know what will happen next month.”
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Meanwhile, the Aggregate Composite MLS Housing Price Index was up 0.9 per cent year-over-year in June, marking the 14th consecutive month of decelerating gains and the smallest increase since 2009.
“Home prices, while they’re still increasing, are accelerating at a much slower rate,” says Klump. “The price increases have been centred in the condo market, while the cost of single family homes has remained quite stable.”
Stop arguing about supply versus demand
Ryerson Centre for Urban Research and Land Development senior researcher Diana Petramala is sick of hearing people argue that either a lack of supply or a surplus of demand is leading to higher housing prices. It’s the interaction between the two factors that matters, she says.
“Prices follow the sales-to-listings ratio in most housing markets quite closely,” she tells Livabl. “What ultimately matters is how supply responds to demand. You can have a drop in demand, but if it’s accompanied by a bigger drop in supply, the outcome will still be higher prices. The market is quite efficient at adjusting to macro-economic factors, if left on its own.”
Some industry players maintain that 2017’s red hot prices weren’t caused by a lack of supply, since supply levels were largely in line with their long-run average. But Petramala says this argument doesn’t hold up to scrutiny.
“Yes, [it’s true that supply was inline with the long-run average], but housing demand was stronger from increased global investment in housing and the big demographic push from Millennial [home buyers],” she says. “However, regulation and approval delays kept supply restrained at long-run averages. The result was sharply growing prices.”
There’s still demand for low-rise homes
The condo market has consistently outperformed the low-rise market over the past few months, leading some to speculate that Canadians’ appetite for detached homes may be weakening.
But according to RE/MAX INTEGRA Ontario-Atlantic Region executive VP Christopher Alexander, that’s just not true.
“I don’t think buyers ever weren’t interested,” he tells Livabl. “Consumers were not confident because a lot of headlines they were reading shouted that prices were falling and sales were underperforming.”
After a new stress test was introduced in January, home buyers took some time to consider whether they wanted to re-enter the market, says Alexander.
“Before those new rules came into place, people really wanted to buy, but afterwards they were cautious and wanted to see how things would play out,” he explains.
Now, with detached prices up in 75 per cent of GTA neighbourhoods in June, he says that’s about to change.
“[B]arring some unforeseen global event, I think the market is showing serious signs of a rebound,” he shares. “Based on June’s numbers I think we already have rebounded, and heading into the fall and the rest of the year we could see heightened activity.”