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Did April Showers Bring May Flowers for the Canadian Housing Market?

Spring is supposed to be the best season in real estate. Was it this year?

The May 2019 Teranet-National Bank House Price Index was released on June 19, 2019, and it showed a 0.5% gain from April 2019 — the first monthly gain in nine months.

However, the 0.5% is not all that it appears. Although May of 2019 saw a rise, it was the smallest May rise in 21 years of index history.

Additionally, the 0.5% figure is not seasonally adjusted. If it were, the index would have been down 0.4% on the month.

Unadjusted indexes were up on the month for nine of the 11 metropolitan markets of the composite index, with only Vancouver and Edmonton being down 0.2% and 0.3% respectfully. However, when seasonally adjusted only the indexes for Montreal, Quebec City, Halifax, Ottawa-Gatineau, Halifax, and Hamilton remain positive.

According to National Bank Deputy Chief Economist Matthieu Arseneau and Economist Kyle Dahms, May is historically the second strongest month of the year. The national House Price Index grew at its slowest annual pace in this cycle.

“While a combination of stress testing measures, foreign buyer’s taxes and earlier increases in mortgage rates have contributed to the slowdown, recent data shows that the Canadian housing market is stabilizing,” Arseneau and Dahms wrote in the June 19, 2019 Teranet-National Bank House Price Index Economics and Strategy Report.

“Home sales increased for a third month in a row in May, rebounding close to their past ten year average, a development which was made possible thanks to a booming labour market and a plunge in mortgage rates.”

In Toronto, condos and other dwelling type prices showed pullbacks in May. Resale market conditions, on the other hand, did not show the same. Arsneau and Dahms also pointed to the fact that the GTA has created 92,000 jobs so far in 2019.

The Vancouver market saw the 10th straight month without a rise in May. However, its job market is also doing well, which Arseneau and Dahms said could have contributed to the strong rebound in resales observed last month.

The next Teranet-National Bank House Price Index report is scheduled for July 18, 2019, where we will examine home prices for the month of June 2019.

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