Home prices fell last month except in one area

A leading measure of Canadian home prices declined in October nationwide although one housing market bucked the trend.

The Teranet-National Bank National Composite House Price Index was down 0.4% compared to September, only the fourth time in the index’s 20-year history that there has been an October decline.

Ten of the eleven metros tracked declined – Victoria (−0.1%), Toronto (−0.2%), Winnipeg (−0.2%), Calgary (−0.3%), Ottawa-Gatineau (−0.4%), Hamilton (−0.5%), Edmonton (−0.7%), Vancouver (−0.8%), Quebec City (−1.0%) and Halifax (−1.0%).

Montreal was the only metro where the index rose, up 0.2%, marking its seventh consecutive monthly advance.

Year-over-year, the index was up 2.8%, beating the annual gains posted in the previous two months due to a large drop in August and September 2017.

With interest rates rising, the report does not forecast much upside for home prices in the months ahead.

Affordability worsened
While the October price index decline provides some relief for first-time buyers, affordability over the previous quarter worsened.

Nine out of ten urban markets saw lower affordability in Q3 than in the previous three months.

Even in Vancouver and Toronto, easing prices did not improve affordability as wages were down and mortgage rates rose.

Montreal and Ottawa-Gatineau saw the largest decline in affordability and the report says that these markets appear to be unaffected by rising rates and tighter lending standards, with home prices rising sharply (2.1% and 2.5% quarter-over-quarter respectively).

The report also highlights the relative deterioration of condo affordability compared to non-condo homes with strong demand pushing prices up 6.8% year-over-year while non-condo prices were flat.