Home prices up in March, but gains continue to moderate

The MLS® Home Price Index (HPI)1, the leading measure of Canadian home prices, stayed above year-ago levels in March 2012 according to statistics released today by The Canadian Real Estate Association (CREA). Year-over-year gains have been moderating. The increase in March was the smallest since last June.

Highlights:

·         The Aggregate Composite MLS® Home Price Index in March 2012 was up 5.1% yearover-year – on par with the gain in February and the smallest increase since June 2011.
·         Toronto posted the largest year-over-year increase (7.3%), followed by Vancouver (5.3%), the Fraser Valley (3.3%), Calgary (2.6%), and Montreal (2.2%).
·         Year-over-year gains were largest for one-and two-storey single family homes, which rose 5.4% and 6.8% respectively. Apartment prices climbed 3%, and townhouse prices were up 2.6%.

The MLS® Home Price Index rose 5.1 per cent in March 2012 compared to the same month last year. The increase was on par with February’s gain, which was the smallest since last June.

“Overall price trends show that Canada’s housing market continues to moderate,” said Wayne Moen, CREA President. “Price increases have been shrinking since last fall. While that trend paused in March, it may in part reflect an early spring in many parts of the country, resulting in increased competition among buyers. That said, headline numbers mask some important differences in price trends among local housing markets and housing types. Since all real estate is local, buyers and sellers should talk to their local REALTOR® to best understand how home price trends are shaping up where they live.”

The MLS® HPI remained above its year-ago level in all five of the markets tracked, led by Toronto (7.3%). It also held above year-ago levels in all housing “The index typically experiences these types of month-over-month gains in the spring, which coincides with when the balance of supply to demand is tightest,” said Gregory Klump, CREA’s Chief Economist. “With that in mind, it’s important to look at month-to-month movements in the context of how they compare to the same period in previous years. While the overall monthly price increase was on par with last year’s figure, it masks slowing price momentum in the Lower Mainland area of British Columbia. Slower price gains there were offset in March by a modest acceleration of price gains Calgary, Toronto, and Montreal.”

In focus: Some of the trends underlying the overall MLS® HPI

Momentum in the overall MLS® HPI held steady between February and March 2012, with equal yearover-year gains of 5.1 per cent. However, because the MLS® HPI is composed of four Benchmark housing types and more than 1,600 sub-areas spread among five housing markets, the overall index can mask price trend variations among Benchmark housing categories within a single housing market and between different parts of the country.

Price gains for two-storey single family homes have surpassed this in other housing categories since the beginning of the economic recovery. Despite a recent deceleration in gains, two-storey single family homes posted the strongest year-over-year price gains in March. By contrast, price gains for one-storey single family homes picked up in March, which was driven mainly by increases in Montreal and Toronto.

Price growth remains much stronger for one-and two-storey single family homes compared to multi-family units, with price gains for single family homes (6.4%) running roughly double that for townhouse units (2.6%) or apartment units (3.0%). Even so, there are significant differences between housing markets.

In Montreal, townhouse unit prices are rising faster than prices for other housing types. This likely reflects the desirability of their location, since townhouse units are predominantly centrally located while single family homes are often located further from Montreal’s city centre.

Price gains have remained strongest in Toronto since mid-2011. The rise in Toronto’s Composite MLS® HPI was a full two per cent above the year-over-year increase in Vancouver’s composite index. This represents the largest spread for price growth between these two markets in more than a year. This gap may widen further, since the Vancouver market is showing signs of coming off the boil while a lack of available supply relative to demand keeps Toronto’s housing market in seller’s market territory.

Copyright CREA reprinted with permission