Existing Home Sales Drop Again
Fewer Canadians purchased a home via the Multiple Listing Service (MLS) in August 2022 than they did in July 2022 or in August 2021, according to the latest data from the Canadian Real Estate Association (CREA). Fewer still listed their homes for sale, while the national average selling price posted a 3.9% year-over-year decrease.
The national realtors’ group said last week home sales recorded over the MLS edged down a slight 1% between July and August 2022. While this was the sixth consecutive month-over-month decline in housing activity, it was the smallest of the six as the national sales slowdown triggered by rising interest rates continues to moderate.
It was close to an even split between the number of markets where sales were up and those where sales were down. Gains were led by the Greater Toronto Area (GTA) and a large regional mix of other Ontario markets. These were offset by declines in the Greater Vancouver Area (GVA), Calgary, Edmonton, Winnipeg, and Halifax-Dartmouth.
The actual (not seasonally adjusted) number of transactions in August 2022 came in 24.7% below the same month last year. While still a large decline, it was smaller than the 29.4% year-over-year drop recorded in July.
“August saw national sales hold steady month-to-month for the first time since February which, along with a stabilization of demand/supply conditions in many markets, could be an early sign that this year’s sharp adjustment in housing markets across Canada may have mostly run its course,” CREA chairman Jill Oudil said in a statement.
“That said, some buyers may choose to remain on the sidelines until they see clearer signs of borrowing costs and prices also stabilizing,” she added.
“The stress test was unpopular with some when it was introduced. But as we have all now watched the Bank of Canada raise its key interest rate by 300 basis points in the space of five months, it’s clear many Canadians were protected by it,” CREA senior economist Shaun Cathcart said. “But should there not be a flipside to the coin? The overnight rate is now officially above the Bank of Canada’s ‘neutral’ range and not expected to go too much higher. This is not about ‘looser’ or ‘tighter’, it is about what is appropriate given where rates are and where they are likely to go moving forward.”
The number of newly listed homes fell to 5.4% on a month-over-month basis in August. This built on the 5.9% decline noted in July, as some sellers appear content to stay on the sidelines until more buyers are ready to get back into the market. The decline in new supply was broad-based, with listings decreasing in about 80% of local markets, including every large market except for Montreal, where new supply was mostly flat from July to August.
With sales little changed and new listings down in August, the sales-to-new listings ratio tightened to 54.5% compared to 52.1% in July. The August 2022 reading for the national sales-to-new listings ratio was very close to its long-term average of 55.1%.
There were 3.5 months of inventory on a national basis at the end of August 2022, up slightly from 3.4 months at the end of July. While the number of months of inventory remains well below the long-term average of about five months, it is also up quite a bit from the all-time low of 1.7 months set at the beginning of 2022.
The actual (not seasonally adjusted) national average home price was $637,673 in August 2022, down 3.9% from the same month last year.
Excluding the GVA and the GTA – this country’s most active and expensive housing markets – cuts $114,800 from the national average price.
In her research note, Rishi Sondhi of TD Economics pointed out existing home sales are now 17% below their pre-pandemic levels.
She also believes rising interest rates will continue to dampen the Canadian real estate market and believes average prices could fall as much as 20% from their high in the first quarter on 2022 by the end of 2023’s first quarter.