FACTS: TM was up 0.7% on a monthly basis, the first rise in 9 months. Prices rose in May in four of the six metropolitan areas covered, namely Toronto (+2.0%), Montreal (+1.5%), Halifax (+1.3%) and Ottawa (+0.7%). Price declines were registered for an eleventh month in a row in Vancouver (-0.1%) and Calgary (-2.2%). On a y/y basis, the composite index declined 6.9%, with home price deflation persisting in four cities: Calgary (-12.2%), Vancouver (-11.8%), Toronto (-6.5%) and Ottawa (-0.6%). Price changes were still up in Montreal (2.3%) and Halifax (1.0 %).

OPINION: Today’s report is consistent with the improved conditions on the national home resale market, as the number of homes sold largely exceeded the pre-recession level in June, while the number of existing homes newly listed for sale continued to decline. The new listings-to-sale ratio is now in a zone usually associated with a balanced market. So, home prices could continue to improve on a monthly basis.

However, on a y/y basis, national home price deflation might remain unchanged, or even worsen slightly over the next few months, due to a base effect. In any event, the resulting negative wealth effect in Canada will definitely be far less severe than the one experienced in the U.S..

Mounir R. El-Ayari, CIM, FCSI, C.h. P. Strategic Wealth
Investment Advisor
Associate Portfolio Manager
e-mail: mounir.el-ayari@nbf.ca