Resale and New Build: A Tale of Two Housing Markets

By Clare Tattersall

May was another relatively uneventful month for many Canadian housing markets, with national month-over-month home sales edging slightly lower and new listings moving only a little higher.

This is according to the latest report by the Canadian Real Estate Association (CREA), which, at the same time, says May could prove to be the last quiet month now that the Bank of Canada has begun to drop interest rates, leading to increased activity moving forward.

“The Bank of Canada’s June 5 rate cut may have only been 25 basis points, but the psychological effect for many who have been sitting on the sidelines was no doubt huge,” says CREA’s chief economist, Shaun Cathcart. “The question now turns to further rate cuts, specifically, how fast and how far.”

Home sales activity recorded over Canadian MLS systems dipped 0.6 per cent between April and May, remaining a little below the average of the last 10 years, while the number of newly listed properties ticked up 0.5 per cent month-over-month.

The result of slower sales amid more new listings this year has been an increasing number of homes for sale across a majority of Canadian housing markets. The detached home segment in the Greater Toronto Area, for instance, closed May with 9,335 properties on the market — the highest level since September 2019.

At the end of May, approximately 175,000 properties were listed for sale on all Canadian MLS systems, up 28.4 per cent from a year earlier but still below historical averages.

Months of inventory on a national basis was 4.4 months, up from 4.2 months at the end of April. Looking past the volatility at the onset of the Covid-19 pandemic, it’s the highest level for this measure since fall 2019.

Home prices have largely slid sideways across most of the country, with the exceptions of Calgary, Edmonton and Saskatoon, where prices have steadily ticked higher since the beginning of 2023. The average selling price of a home in Calgary increased 9.8 per cent in May, from the same month last year.

The MLS home price index dipped just 0.2 per cent from April to May, and was down 2.4 per cent from the year prior.

The national average price was $699,117 in May, down four per cent year-over-year.

“The spring housing market usually starts before all the snow has melted, somewhere around the beginning of April, but this year I believe a lot of people were waiting for the Bank of Canada to wave the green flag,” says CREA chair James Mabey. “That first rate cut is expected to bring some pent-up demand back into the market, and those buyers will find there are more homes to choose from right now than at any other point in almost five years.”

While the residential resale market has been sleepy, housing starts in May climbed 10 per cent compared with April, according to Canada Mortgage and Housing Corporation (CMHC) — the highest level in seven months.

The housing agency credited the country’s two most populous cities for the increase, with starts in Toronto up 26 per cent and Montreal up 200 per cent year-over-year. Montreal’s total starts result was driven by a 59 per cent increase in single-detached starts and a 218 per cent increase in multi-unit starts versus May 2023.

“The focus for homebuilders remains on multi-unit construction in Canada’s major centres as both the seasonally adjusted annual rate (SAAR) and trend of housing starts increased in May, following two consecutive months of decline,” says Bob Dugan, CMHC’s chief economist. “This was due to growth in actual year-over-year starts, driven by significantly higher multi-unit starts, particularly in Montreal and Quebec. While this is good news for housing supply, we do expect downward pressure on starts through the rest of 2024.”

The six-month trend in housing starts increased 3.8 per cent to 247,830 units in May, from 238,859 units in April. The trend measure is a six-month moving average of the SAAR of total housing starts for all areas in Canada.

The actual number of housing starts across Canada in urban centres with a population of at least 10,000 was up 39 per cent year-over-year to 21,652 units in May. This increase was driven by higher multi-unit starts and higher single-detached starts, up 49 per cent and six per cent, respectively.

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