Canada: Home Price Inflation Decelerates To 3.4% In October

On a y/y basis, the Teranet–National Bank National Composite House Price IndexTM rose 3.4% in October (top chart). Over the 11 metropolitan areas covered, 12-month price changes vary widely. Four largely exceeded the national average: Halifax (+8.9%), Hamilton (+7.2%), Toronto (+6.4%) and Winnipeg (+5.9%). Two were very close to the average: Montreal (3.6%) and Calgary (3.5%). Five were below: Quebec City (+2.6%), Edmonton (+2.6%), Ottawa-Gatineau (+2.5%) with price deflation in two regions: Vancouver (-1.0%) and Victoria (-1.7%).

On a monthly basis, the Composite index declined 0.2% in October, after a 0.4% drop in September. In October, the index declined in 7 of the regions covered: Quebec City (-0.9%), Victoria (-0.6%), Toronto (-0.6%), Ottawa-Gatineau (-0.4%), Montreal (-0.3%), Calgary (-0.2%) and Halifax (-0.1%). Prices were flat in Winnipeg, and were up in Vancouver (0.1%), 0.3% in Edmonton and 0.4% in Hamilton.
OPINION: Recent monthly changes in the Composite House Price Index are consistent with a sequence of declines in (seasonally adjusted) existing home sales, and the resulting loosening of market conditions (middle chart).

This view is not changed even if the Index, when seasonally adjusted, increased slightly in September and October instead of decreasing (bottom chart).

In any event, the Teranet – National Bank House Price Index is much more representative of house price changes than median or average prices of homes sold published by real estate boards. The latter are biased by change in the composition of homes sold by price brackets. For instance, the recent changes in mortgage rules have discouraged would-be first-time home buyers, who typically target low-end houses. It results in an increase in average or median prices of homes sold not representative of an actual rise in real estate prices.