Year-old federal rules that make it harder to qualify for a mortgage haven’t taken the wind out of the sales in two “resilient” Ontario housing markets while some bigger cities elsewhere in the country have struggled in the policy’s wake.
“Markets such as London and Windsor remain tight and have proved resilient to the stricter mortgage stress tests implemented on January 1st, 2018,” writes Marc Desormeaux, a provincial economist for Scotiabank Economics, in a recent report.
Those stress tests, which apply to uninsured mortgages (putting down 20 percent means you don’t need to get mortgage insurance), increased the rate at which applicants need to qualify for a mortgage by 200 basis points.
BC realtors say the test has made a dent in their markets, industry group Mortgage Professionals Canada has opposed it in its current form, and so has the Ontario Real Estate Association. So what’s helped London and Windsor weather the storm?
“I think in both cases they’ve seen some pretty strong population growth relative to history, at least over the last few years,” replies Desormeaux when asked about the report he authored earlier this month.
“They’ve benefited from immigration, [and] migration into Ontario from other provinces. Those factors are generally supportive of upward pressure on prices,” he adds.
Of course, a shortage of homes being listed doesn’t hurt. “There are currently fewer homes out there for sale than at any other point on record going back to the late 1980s,” says Tina Roy, president of the Windsor-Essex County Association of realtors, in a news brief announcing the year-end release of home sales data.
The data show 6,643 homes changed hands in 2018. While down close to 10 percent from 2017, the tally is the third-highest on record. At the same time, the average price reached $294,573, up 13.3 percent from the previous year.
More recent numbers available from the London and St. Thomas Association of Realtors indicate London and St. Thomas home sales increased 17.4 percent last month. For London, the average price of a home in January was $387,859, up 11.2 percent on a year-over-year basis.
“We’re starting to observe signs of movement toward more balance in the marketplace, based on the sales-to-new listings ratio,” says Earl Taylor, president of the London association, in a statement.
A common gauge of market balance, the ratio is typically calculated by dividing sales by new listings in a given month and expressed as a percentage.
A ratio of 100 percent suggests homes are selling at a rate as fast as new listings are appearing, and generally anything over 60 percent indicates a seller’s market and below 40 percent means a market favour’s buyers, meaning lower prices.
In January, the sales-to-new listings ratio for London was 83.4 percent, according to the Canadian Real Estate Association.
Scotiabank’s Desormeaux says tight supply in London and Windsor suggests prices will continue to increase through the spring.
“That would again indicate that we continue to see some fairly substantial price gains over the immediate near term, next few months.”
Article courtesy of: Josh Sherman of Livabl