“The new stress test certainly had an impact with home sales in the area stagnant”
You may have noticed ‘for sale’ signs sticking around on neighbours lawns a bit longer than usual. Due to slow sales here in Ontario and in B.C., on Friday the Canadian Real Estate Association lowered its national home sales forecast for the year. In March, CREA predicted a 7.1 per cent decline of yearly sales and now the industry association expects sales to fall 11 per cent compared with a year ago.
Combined Sales for March, April and May hit a nine year low
The number of home sales took a huge nose-dive in May with CREA reporting a seven-year low. Slightly more than half of all local housing markets reported fewer sales in May compared to April.
“The decrease almost entirely reflects weaker sales in B.C. and Ontario amid heightened housing market uncertainty, provincial policy measures, high home prices, ongoing supply shortages and this year’s new mortgage stress test,” the association said in a statement.
Local realtor Marg Scheben-Edey says the new stress test certainly had an impact with homes sales in the Collingwood area stagnant so far.”
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In a statement, CREA President Barb Sukkau said “The extent to which the new stress test is sidelining home buyers varies among housing markets and price ranges.” There is also the relatively new foreign buyers tax Ontario brought in after seeing the impact it had in B.C. and the central bank’s five year benchmark rate rose from 5.14 per cent to 5.34 per cent.
“This year’s new stress-test became even more restrictive in May, since the interest rate used to qualify mortgage applications rose early in the month,” said Gregory Klump, CREA’s chief economist. “Movements in the stress test interest rate are beyond the control of policy makers. Further increases in the rate could weigh on home sales activity at a time when Canadian economic growth is facing headwinds from U.S. trade policy frictions.”