Home sales in Canada have risen by 12.6% in July year-on-year, suggesting that the housing market is recovering from strains caused by the implementation of the stress test. The stress test, also known as the minimum mortgage qualifying rate, requires potential borrowers to qualify for a mortgage at an inflated rate, in order to establish if a borrower can make payments in the case of interest rate increases or changes in income. This resulted in greater difficulties in qualifying for a mortgage for many borrowers, slowing home sale rates.
However, home sales across Canada in the month of July show the most robust levels since the test was implemented in January of 2018. Home sales soared across many of Canada’s largest housing markets, including the Greater Toronto Area, Hamilton-Burlington, and Ottawa. The ratio of sales and new listings reached what is seen as a more balanced market, from 57.6% in June to 59.8% in July, exerting pressure on home prices to rise. In July, the average price for a home nationwide was approximately $499,000, which is 3.9% higher than in July last year, and up 2.6% from June after being seasonally adjusted. Substantial price increases of over 10% in many housing markets in Ontario largely contributed to the substantial national average price increases.
Home sale rates may continue to jump and prices may persistently climb given the economic tensions beyond our borders that are driving the national costs of borrowing down. Although the recent surge in home sales show a strengthening housing market, sales continue to be significantly below pre-test levels, and global tensions put stress on the future of the housing market.
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