TORONTO, ONTARIO--(Marketwire - Sept. 17, 2012) - With today's Canadian home sales numbers for August from the Canadian Real Estate Association (CREA) down 5.8 per cent from a year ago, demand is clearly moderating across the country - in part due to the new mortgage rules implemented by the Department of Finance, according to BMO Economics.
"Stricter mortgage rules appear to be further softening the Canadian housing market, and the landing is tracking harder in some markets than others," according to Robert Kavcic, Economist, BMO Capital Markets. "August was the first full month under stricter mortgage rules that took effect July 9th, so this softening in sales is hardly a surprise," noted Mr. Kavcic.
The report noted that 20 of 26 cities reported lower sales versus July, indicating that the rule changes indeed had a broad-based impact. The most notable month-to-month declines were in Vancouver and Toronto, with reductions of 9.3 per cent and 7.8 per cent, respectively.
Mr. Kavcic also noted that supply of available homes for sale is increasing relative to demand, sitting at a seasonally-adjusted 6.5 months of inventory in August, up from a recent low of 5.6 in March and a five-year average of about 6.
"Nowhere is this more apparent than in British Columbia, where the months' supply rose to 10.1 months in August, matching the highest level since the depths of the recession," stated Mr. Kavcic. "In Ontario, the shift in market balance has been much less pronounced, with the current supply sitting at 4.2 months, only slightly above long-run norms." Mr. Kavcic added that new listings in Toronto fell a hefty 7.7 per cent in August, perhaps in response to softer market conditions.
Frances Hinojosa, Mortgage Expert, BMO Bank of Montreal, said that the fall season represents the second-busiest time of the year for real estate in Canada, and that the increase in supply of homes for sale gives potential buyers an advantage in the marketplace.
"The increase in homes for sale is good news for those who have been standing on the sidelines waiting for the right opportunity to dip their toes into the housing market," said Ms. Hinojosa. "With another busy buying season upon us, it's important that potential buyers review their financial plans and make the necessary adjustments to reflect changes in the marketplace before heading out to property shop this fall."
Ms. Hinojosa recommended house hunters get a head start on planning by getting pre-approved for a mortgage before setting out to lock down the perfect home.
"Whether it's a buyer's first mortgage or fifth, getting pre-approved for a mortgage is one of the first things you should do when you decide to buy a home - even before you start your search," added Ms. Hinojosa. "This will give you a better idea of how much you can borrow, how much home you can afford and what your monthly payments will be. When it comes time to make an offer, you'll be able to act more quickly knowing that your financing is already in place."
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $542 billion as at July 31, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.