Canadian home sales begin to slow in March 2020
Real estate sales reported by the Canadian Real Estate Association (CREA), Canada’s largest real estate association, have continued to drop, dropping an additional 12.6% from March in April of this year. The report released this month shows that housing activity (how many homes are for sale and how many are sold) has been at its lowest level since 2020.
While the national downturn was influenced most by the Greater Toronto Area simply because of its size- it also had an influence on 80% of other markets nationwide, with almost all other large cities nationwide also reporting significant decreases in sales for April. There were only 2 notable exceptions where sales either remained the same or increased. They were Victoria, Montreal and Halifax-Dartmouth.
The actual (not seasonally adjusted) number of transactions in April 2022 came in 25.7% below the record for that month set last year. As has been the case since last summer, it was still the third-highest April sales figure ever behind 2021 and 2016.
Following a record-breaking couple of years
Jill Oudil, Chair of CREA said, “With the increase in interest rates and high inventory of houses on the market, housing markets across Canada have cooled off over the past few months. This is good news because it gives potential buyers a chance to take some time to consider their options while it also gives sellers an opportunity to try new strategies in order attract prospective buyers.”
“After 12 years of ‘higher interest rates are just around the corner,’ here they are,” said Shaun Cathcart, CREA’s Senior Economist. “But it’s less about what the Bank of Canada has done so far. It’s about a pretty steep pace of continued tightening that markets expect to play out over the balance of the year because that is already being factored into fixed mortgage rates. Of course, those have, for that very reason, been on the rise since the beginning of 2021, so why the big market reaction only now? It’s likely because typical discounted 5-year fixed rates have, in the space of a month, gone from the low 3% range to the low 4% range. The stress test is the higher of 5.25% or the contract rate plus 2%. For fixed borrowers, the stress test has just moved from 5.25% to the low 6% range – close to a 1% increase in a month! It won’t take much more movement by the Bank of Canada for this to start to affect the variable space as well.”
Listings edged back by 2.2% in April when compared to their listings in April a year ago. The slight monthly decline resulted from a relatively even split between markets where listings rose and those where they fell. Notable declines were seen in the Lower Mainland, but listings increased in Calgary, Edmonton, and Victoria comparatively.
With sales falling by more than new listings in April, the sales-to-new listings ratio eased back to 66.5%. This is right on the border between what would constitute a seller’s market and a balanced market. The long-term average for the national sales-to-new listings ratio is 55.2%.
Canadian Home Prices
The Macro Composite MLS® HPI. A measure of housing prices in the top 12 metropolitan markets in Canada, was up 23.8% on a year-over-year basis in April even though this was a marked slowdown from the near-30% record increase logged just two months earlier.
The fever broke in the Canadian housing market
While the Canadian real estate market appeared to be losing steam, last month prices were still on average up 6.8% so it looks like residential construction trends are still holding strong.
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