Residential Market Commentary - Home sales fall, debt worries rise

  • First National Financial LP

The latest statistics from the Canadian Real Estate Association are stark but they should not be surprising.  April sales hit a 36-year low, down nearly 57% from a month earlier and down almost 58% year-over-year.

As with March, though, average prices remained steady.  Compared to a year ago the national average dipped 1.3% to just over $488,000.  With Toronto and Vancouver taken out of the calculation the national average drops by nearly $100,000.

CREA points out that its composite Home Price Index shows an increase of almost 6.5% YoY.

The association is not offering any forecasts on sales or prices going forward.

As the COVID-19 pandemic continues to run roughshod through the housing market, the Bank of Canada is repeating its concerns about high household debt.  The Bank sees the number of vulnerable households – those that put more than 40% of their income toward debt payments – increasing and falling behind on loan payments. 

Calculations by the BoC indicate that up to one-in-five home-owning households do not have enough money to cover two months of expenses.  One-third do not have enough to cover four months.  Some 700,000 households have received deferrals, so far.

The central bank’s projections see the mortgage arrears rate climbing by about 0.8%, peaking next year when payment deferral plans offered by lenders start to expire.  This is the Bank’s current, worst case scenario.  The current mortgage arrears rate stands at just 0.2%.

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