Home Sales Are Up: Good News For Lenders?

On November 2nd the Toronto Real Estate Board posted improved home sales in the month of October – up 12% from September. However, year-over-year home sales were still down 27%. The average home price climbed to $780,104 – less than a 1% increase.

Property transfer data released by the British Columbia government also showed that home purchases by foreign nationals doubled year over year. This also indicates that the Vancouver market is recovering from the 15% foreign buyer tax implemented to cool its housing market. The Vancouver housing market has largely bounced back from the new regulations imposed in 2016, which could telegraph the trajectory of real estate in the Greater Toronto Area in the months to come.

Alternative lender Equitable Group Inc. (TSX:EQB) had a solid October that saw the stock climb 7%. Shares are still down 0.17% for the year, and there is reason for caution among investors. New regulations introduced by the OFSI could stifle new loan growth as uninsured buyers will be subject to a stress test beginning in January 2018.

Home Capital Group Inc. (TSX:HCG) stock was down 0.58% in late morning trading on November 2nd. In its second quarter earnings report Home Capital also warned that the new OSFI mortgage rules could hinder growth in its core business.

2018 will likely be an uphill battle for alternative lenders, but it appears for the time being that home sales and prices are beginning a slow recovery from the sizable correction that lasted from April into the early fall.