TORONTO 鈥� Home prices posted the second-highest increase ever recorded in a single month after the one observed in July 2006, according to the latest Teranet-National Bank composite index.
The index for July was up 2.4 per cent from June, after seasonal adjustments, and marked the fourth consecutive monthly rise.
After declining from a peak in April 2022 as the higher rate environment sidelined some buyers, recent rises in the home price composite index have erased some of this correction, the report said.聽
"The deep declines that we saw through 2022 are largely being unwound," said Douglas Porter, the Bank of Montreal's chief economist.聽
The Teranet-National Bank index tends to lag other housing market measures in part because it's more detailed, he noted.
Other measures are starting to show some softening in the market over the summer, and Porter thinks that softening will begin to show up in this index going forward as well.
"I think what we're going to see is that this may be the last hurrah for a while for home prices," he said.聽
July home sales saw their largest annualized increase in more than two years, the Canadian Real Estate Association reported Tuesday. But they were little changed from June as the national housing market showed signs of stabilizing this summer, the association said.聽
Prices could continue climbing in the third quarter of the year, supported by strong demographic growth and low supply, wrote National Bank of sa国际传媒 economist Daren King in the report.聽
"The deterioration in affordability with recent interest rate hikes in a less buoyant economic context should represent a headwind for house prices thereafter," King wrote.
Porter agreed with King that the housing market will face more headwinds as the year progresses, though high immigration will help support prices.
Expectations for interest rates are increasingly that they will remain higher for longer, said Porter, which will be a pressure on the housing market over the longer term.聽
Though mortgage interest costs are contributing to the Consumer Price Index in an "unfortunate side effect" of the central bank's fight against inflation, Porter said things would be much more dire if the central bank hadn't raised rates.聽
"You can't just look at the impact on mortgage interest costs in isolation, you have to look at the overall picture," he said. "The overall picture is showing that inflation and even underlying inflation has come down over the last year."
Eight of the 11 markets in the Teranet-National Bank composite index were up in July, with Halifax up the most at 4.9 per cent. Vancouver gained 3.9 per cent, while Toronto added 3.5 per cent.
Prices fell 1.2 per cent in Quebec City, 0.9 per cent in Montreal and 0.3 per cent in Calgary.
Compared with a year earlier, the overall composite index in July was down 1.9 per cent.
This report by The Canadian Press was first published Aug. 18, 2023.
Rosa Saba, The Canadian Press
