The Canadian housing market recorded somewhat of a stabilization in June. The news comes just days after being featured on the number one spot for Bloombergs “housing bubble dashboard” which featured Canada and New Zealand as the most vulnerable to a correction in home prices.
Per the Canadian Real Estate Association, national home sales inched higher in June, up 0.3% year-over-year. The slight increase in sales was largely in part due to an uptick in Eastern Canada, where lenders have shifted mortgage originations to more stable markets. “There’s a growing divergence in Canadian housing market trends between eastern and western Canada,” noted Gregory Klump, CREA’s Chief Economist. Sales increased 16.2% in Quebec city and 9.6% in Toronto, while falling 15% in Greater Vancouver and 4.6% in Calgary. The overall year to date trend in home sales remains weak, especially considering mortgage rates have plummeted nearly 90 basis points since the start of the year.
The sluggish activity in the housing market appears be weighing on the auto market. The Canadian auto industry posted its sixteenth consecutive deceleration in sales for June, contracting another 7.2% year-over-year. “We’ve been expecting single digit declines all year and that’s exactly what we’ve been getting. The auto markets have always been cyclical and we’re clearly in a correction period,” says Dennis DesRosiers, president of the Toronto-based consultancy.
The recent decline in both housing and auto sales is part of an aging credit cycle. Here’s a chart of the annual change in auto sales, which correlates closely with the change in home sales.