Canadian Home Sales Fall for Fifth Month in a Row, Down 29% From Last July

The Canadian Real Estate Association found home sales fell for the fifth consecutive month between June and July. On a seasonally adjusted basis, the association said sales in July fell 5.3% compared with June. The actual number of sales last month was 37,975, down 29% compared with July last year.

“That leaves activity back in the pre-COVID range, or roughly 40% below the peak of the demand-side blowout seen last year,” said Robert Kavcic, BMO Capital Markets senior economist, in a note to analysts. “Unadjusted, it was the quietest July for sales since the financial crisis in 2020.”

July’s drop in month-over-month sales was the smallest of the past five months. Market watchers said it’s too soon to say whether that trend will continue. Still, economists and CREA chair Jill Oudil said it is a continuation of the market cooling from the torrid pace seen last year and early this year, when bidding wars were the norm.

Much of the cooldown has been attributed to the Bank of Canada increasing its key interest rate by one percentage point to 2.5% in July in the largest hike the country has seen in 24 years.

Mortgage rate changes tend to mirror such hikes, impacting buying power. As the rates have risen and sales plummeted, many buyers have sat on sidelines, predicting better deals will come in the fall and frustrating sellers, who have had to come to terms with the fact that they likely won’t fetch as much as neighbours who sold in the winter.

“There’s definitely a lot more people who are waiting until September before they list properties and they’re trying not to list in August, if they don’t have to,” said Davelle Morrison, a Toronto broker with Bosley Real Estate Ltd. As a result, new listings in July totalled 73,436, down 6% from July 2021 and on a seasonally adjusted basis, down 5% from June.

When homes were flying off the market earlier this year, people could buy before they sold their own place and have little risk of their property not selling. Now, Morrison is telling people to sell their place first because of how long properties are sitting. She’s also telling her clients to “buckle up” if prices fall more and interest rates continue to rise.

The average sales price was $629,971, down 5% from $662,924 in July 2021 and on a seasonally adjusted basis amounted to $650,760, a 3% drop from June, CREA said. Excluding the typically heated Greater Vancouver and Toronto Areas from the calculation cuts $104,000 from the national average price.

Kavcic feels the drops constitute a market correction that is playing out “almost everywhere, but to varying degrees.” “Southwestern Ontario is feeling it hardest, with markets like Kitchener-Waterloo and London down roughly 15% from their high already,” he said.

He’s noticed Vancouver prices have now fallen over four consecutive months and Montreal has been more immune to but is not escaping the downturn with drops in the last two months.

“We view Alberta as the market most able to weather this storm because it had already stagnated for a number of years before the pandemic, never saw the same froth as Ontario, and is now supported by near-$100 oil and population inflows from other regions,” Kavcic wrote. “But, in a demonstration of the power of higher interest rates, even Edmonton and Calgary have been subject to a flattening (Calgary) or decline (Edmonton) in prices despite still-solid sales activity.”

Source: The Star
Source: Globe and Mail
Source: Financial Post
Source: CREA

Canada’s Annual Pace of Housing Starts Up 1.1% in July

Canada Mortgage and Housing Corp. says the annual pace of housing starts in July edged higher compared with June despite a slowdown in urban starts. The housing agency says the seasonally adjusted annual rate of housing starts in July was 275,329 units, an increase of 1.1% from June.

The annual rate of urban starts was down 0.8% at 254,371 units in July, while multi-unit urban starts fell 0.3% to 195,987 units. The pace of single-detached urban starts dropped 2.3% to 58,384 units.

Meanwhile, rural starts were estimated at a seasonally adjusted annual rate of 20,958 units.

The six-month moving average of the monthly seasonally adjusted annual rates was 264,426 units in July, up from 257,862 in June. “The monthly SAAR and trend were higher in July compared to June nationally, as historically elevated levels of housing starts activity continue in Canada, which have been well above 200,000 units since 2020,” said Aled Ab Iorwerth, CMHC’s deputy chief economist. “Monthly SAAR housing starts in Canada’s urban areas declined in July, driven by lower single-detached starts. However, Vancouver and Toronto both registered much stronger declines in multi-unit starts than in single-detached starts, while Montreal saw similarly large declines in both unit types.”

Source: Globe and Mail
Source: The Star
Source: CMHC

Investment in Housing Construction Breaks Streak, Falling for First Time in Nine Months

Statistics Canada says investment in residential construction declined for the first time in nine months in June, as gains in the non-residential sector helped push overall construction investment up 0.3% to $20.8 billion.

The agency says residential construction investment fell 0.4% to $15.5 billion in June. Quebec had the biggest decline with investment in housing construction falling 6.7% from May to June. Quebec was one of four other provinces and two territories that experienced declines.

Nationally, multi-unit construction investment also slumped in June, dropping 1.6%. “Despite this decrease, investment in multi-unit construction has shown an overall upward trend since October 2021,” Statistics Canada said in its report.

Within the residential segment, investment in single-family homes continued to show strength, rising 0.7% to $8.6 billion, having outpaced multi-unit construction since the COVID-19 pandemic downturn.

The provinces and territories where residential construction investment increased from May to June, were B.C., Saskatchewan, Ontario, New Brunswick, Nova Scotia, and Nunavut. In Ontario, residential construction investment was up 0.9% to $6.3 billion for June. It rose 2.4% in B.C. to $2.6 billion.

On the non-residential construction front, investment in that sector rebounded in June, increasing 2.4% to $5.3 billion for the month, with commercial construction advancing 2.7% to $3 billion, driven by Ontario. Investment in commercial construction had fallen in May, the first time in 13 months, as a result of an Ontario construction workers strike.

Statistics Canada says the total value of investment in building construction rose 3.3% to $62.3 billion in the second quarter, the third consecutive quarterly increase.

Source: Financial Post

Bottom Still a Ways Off for Canada’s Housing Market

Canadian home sales dropped 5.3% in July, the fifth month in a row of declines. Benchmark prices were also down 1.7% from the month before.

Since March, when the Bank of Canada began hiking interest rates, home sales have fallen 31% and benchmark prices almost 6% nationwide, says RBC assistant chief economist Robert Hogue. “And the bottom is likely many months away still as our central bank has more work to do,” Hogue wrote in a note on August 15. The Bank of Canada’s 100-basis-point hike in July “threw ice-cold water on the market,” said Hogue, as it disqualified some buyers from getting a mortgage and shrank the size of the mortgage for others.

Rising borrowing costs are causing both buyers and sellers to think carefully about their next move. Potential buyers are holding back in case prices drop further, while sellers are debating whether they too should wait until the market turns in their favour, Canadian Real Estate Association chair Jill Oudil said in a press release.

New listings declined 5.3% between June and July, with the months of inventory rising from 3.1 to 3.4, the highest level in two years, said economists with National Bank of Canada.

National says market conditions loosened in every province in July, with six out of 10 provinces now in balanced territory. The fall in some of the more overheated markets in Ontario already has been staggering. Home prices are down $166,000 in Cambridge (-17%) and $95,000 in Guelph (-10%), while Kitchener-Waterloo has seen prices skid -16% and Brantford and London, -14% from their February peak, said Hogue. In the Greater Toronto Area the composite MLS home price index has dropped 7% ($89,000) in the past five months.

In British Columbia, Fraser Valley is leading the correction, Hogue said, with benchmark prices falling 5.6% ($65,000) since March, more than twice the decline seen in Vancouver.

Hogue expects the correction to be milder in markets outside Ontario and British Columbia, but cracks are beginning to show. In the past two months, the composite MLS home price index has fallen slightly in Montreal and Quebec City, suggesting that prices have peaked. Prices in Alberta, Manitoba and Nova Scotia have also been softening for the past few months. “We think these provide growing evidence a generalized downturn is underway in Canada,” said Hogue.

Another 100 basis points in Bank of Canada hikes over September and October will further chill the market, leading to a 23% decline in home sales nationally in 2022 and another 15% in 2023, RBC predicts.

So when will Canada’s housing market hit bottom?

Look for it around spring, says RBC. It believes the market will adjust to higher interest rates by early 2023, and then need a few months to tighten supply and demand conditions. By that time prices nationally will be down about 12% from peak, RBC predicts. Ontario and British Columbia could see declines that exceed 14%, while Alberta and Saskatchewan prices may get away with dips of less than 3%.

Source: Financial Post

Canada’s Real Estate Market Correction Gaining Pace, Home Prices Seen Falling Nearly 25% by Next Year

The average home price in Canada is expected to fall 23% by the end of 2023, predicts Desjardins Economics, in a significant downgrade to its earlier forecast. “Canada’s housing market is correcting quickly, and faster than we anticipated in our downbeat June forecast,” Desjardins said. In the previous forecast, the Montreal-based financial services company predicted national home prices would fall 15% during the same period.

However, Desjardins economists Randall Bartlett, Helène Begin and Marc Desormeaux said in their report that average housing prices have already dropped 15%, or more than 4% in “each of the three months through June.” Add in rapidly falling home sales and rising borrowing costs as the Bank of Canada hikes rates, and the Desjardins team said their “gloomier” outlook was a done deal.

But the housing correction won’t be even across the country. “We continue to believe that home prices will generally fall the most over the forecast in provinces that saw the largest gains during the pandemic,” the economists said.

Desjardins predicts New Brunswick, Nova Scotia and P.E.I. will bear the brunt of a sharply correcting market with prices falling by 29%, 27% and 25%, respectively, from the peak in February 2022 to December 2023 after having risen 71%, 67% and 62% from December 2019 to February 2022.

In B.C. and Ontario, Canada’s housing juggernauts, where “the correction … has been more abrupt than elsewhere,” Desjardins estimates that prices will fall 22% and 24%, respectively, from the peak to December 2023. From December 2019 to February 2022, they rose 43% and 58% on an average basis.

For Ontario, Desjardins sees the “biggest price swings” in the Greater Toronto Area. “However, we expect the pace of price decline to slow as international immigration, return to work and improved affordability provide tailwinds to the housing market going forward,” the economists said.

In Quebec, the correction has been “less severe,” the report said, noting it expects prices to correct 17% by December 2023 after rising 51% from the end of 2019 to the peak in February 2022. Desjardins expects Quebec to fare better because homes are cheaper — the average price there was $510,000 in April compared with $1 million in Ontario in February — and Quebecers are in “better financial shape.”

The energy-producing provinces of  Saskatchewan, Alberta and Newfoundland are poised to fare the best during this tumultuous period. “They’re now benefiting from post-pandemic tailwinds, largely in the form of higher commodity prices. The resulting job creation and workers it attracts from across the country will provide support to existing home sales and prices,” the Desjardins economists said.

Prices in those three provinces are forecast to drop a more modest 4%, 9% and 11%, respectively, from the peak to December 2023 after having risen 13%, 23% and 26%.

But there is a “silver lining” to Desjardins’ outlook. The economists noted the pace of decline in sales has cooled since accelerating in the spring. Also, despite the double-digit corrections across the country, prices will nonetheless remain above pre-pandemic levels.

Further, Desjardins expects the Bank of Canada’s policy rate to “top out” at 3.25% this year before the central bank turns around and starts cutting rates in 2023 as the housing downturn slows the economy.

“The Canadian housing market downturn is creating challenges for households. Both home sales and prices have contracted quickly and are likely to fall further over the next 18 months. While we don’t want to diminish the difficulties some Canadians are facing, this adjustment is helping to bring some sanity back to Canadian real estate,” the report said.

Source: Globe and Mail
Source: The Star
Source: Financial Post