Home prices spiked month over month
August 25, 2023
July 2023 Canadian resale home prices posted the second-highest increase recorded in a single month since July 2006, according to the Teranet-National Bank composite index.
The index for July 2023 was up 2.4 per cent from June 2023, after seasonal adjustments, and marked the fourth consecutive monthly rise.
After declining from a peak in April 2022, recent rises in the home price composite index have erased some of this correction, the report said.
“The deep declines that we saw through 2022 are largely being unwound,” said Douglas Porter, chief economist at the Bank of Montreal.
The Teranet-National Bank index tends to lag other housing market measures in part because it’s more detailed, he noted.
The Canadian Real Estate Association reported August 15 that July home sales saw their largest annualized increase in more than two years.
Prices could continue climbing in the third quarter of 2023, supported by strong demographic growth and low supply, according to National Bank of Canada economist Daren King’s report.
“The deterioration in affordability with recent interest rate hikes in a less buoyant economic context should represent a headwind for house prices thereafter,” King wrote.
Expectations for interest rates are increasingly that they will remain higher for longer, said Porter, which will put pressure on the housing market over the longer term.
Though mortgage interest costs are contributing to the Consumer Price Index in an “unfortunate side effect” of the central bank’s fight against inflation, Porter said things would be much more dire if the central bank hadn’t raised rates.
“You can’t just look at the impact on mortgage interest costs in isolation, you have to look at the overall picture,” he said. “The overall picture is showing that inflation and even underlying inflation has come down over the last year.”
Eight of the 11 markets in the Teranet-National Bank composite index were up in July—with Halifax up the most at 4.9 per cent. Vancouver gained 3.9 per cent, while Toronto added 3.5 per cent.
Prices fell 1.2 per cent in Quebec City, 0.9 per cent in Montreal and 0.3 per cent in Calgary.
Compared with a year earlier, the overall composite index in July 2023 was down 1.9 per cent.