Canadian Home Sales Drop 40% in February Compared With Year Ago
February’s home sales plummeted 40% from a year ago to levels not seen since before the pandemic as new listings and prices also dropped in what one economist called “hints of a bottoming process.” The plunge in sales came as actual average home prices declined 18.9% compared with the all-time record posted in February 2022, the Canadian Real Estate Association said.
The actual average home price in Canada was $662,437 in February, down from $816,578 in 2022, the association said. Compared with January, national home sales rose 2.3% in February from January, powered by gains in Toronto and Vancouver, while the number of newly listed properties dropped 7.9% month over month.
The drop in transactions in February brought sales in line with what was recorded in 2018 and 2019, suggesting the rise in interest rates over the past year “has blown off some of the pandemic era froth in Canada’s housing market,” BMO chief economist Douglas Porter said in a note to investors.
Canada’s housing market has been sluggish for many months as the Bank of Canada hiked the interest rate eight times in roughly a year, pushing up mortgage rates and scaring off potential buyers. Sellers have also been deterred from the market because they won’t fetch as much now as their neighbours did for homes sold when prices were soaring to new highs during the pandemic.
Now that the central bank has paused rate hikes conditional on economic data, and some believe prices are at or near their bottom, many are expecting buyers and sellers to get off the sidelines this spring, if they haven’t already moved in that direction.
Tirajeh Mazaheri, a Coldwell Banker Prestige Realty agent in Vancouver, characterized January as “extremely slow,” but said as soon as the Bank of Canada signalled an end to hikes, she saw “the market completely began to shift. All of a sudden in a span of one to two weeks, things were starting to fly off the shelf and we were seeing multiple offers,” she said.
Mazaheri saw a condo listed for $699,000 garner 11 offers and a house listed for $2.8 million snag five bids last month. She sees this as a sign that the market is coming back, but warns that inventory is still very low.
February’s new listings totalled 51,366, down 26% from 2022. “Because we don’t have much supply, people are frantically going for whatever comes on the market,” she said.
Despite sales remaining “deep in the doldrums” last month, Porter has recently detected a positive shift in market dynamics and a possible “bottoming.”
“There are signs that sales activity and prices may be close to a nadir,” he said. “The recent sudden plunge in global bond yields, alongside the Bank of Canada’s step to the sidelines, look to provide some support for housing, as does the ongoing job market strength.”
While prices have softened to some degree almost everywhere across Canada, Calgary, Regina, Saskatoon, and St. John’s stand out as markets where home prices are barely off their peaks, CREA said. Overall, prices began to stabilize last fall in the Maritimes, and some markets in Ontario seem to be doing the same now.
The months to come will provide a clearer idea of whether buyers are absorbing the higher interest rate environment, said Penelope Graham, a content director with mortgage comparison site Ratehub.ca. “Given the pent-up demand among buyers, any improvement in affordability will fuel market activity and put upward pressure on home prices,” she said in a statement.
CREA chair Jill Oudil also foresees a more robust market on its way. “While we’re not seeing it in the sales or listings data just yet, I would expect homeowners are getting properties ready for the market and prospective buyers are getting mortgage pre-approvals,“ she said in a statement.
Shaun Cathcart, CREA’s senior economist, added that prospective sellers and buyers are likely biding their time until the optimum conditions to list materialize. “For most, that’s in the spring,” Cathcart said in a statement. “Will buyers jump off the fence to snap homes up in 2023 once they finally start to hit the market? They did in 2019.”
CMHC Says Annual Rate of Housing Starts Climbed 13% in February
Canada Mortgage and Housing Corp. says the annual pace of housing starts climbed 13% in February. The national housing agency says the seasonally adjusted annual rate of housing starts for the second month of the year was 243,959 units compared with 216,514 in January.
The result came as the annual rate of urban starts bumped up 16% to 222,663 units in February. The annual rate of multi-unit urban starts increased 18% to 173,745 for the month, while the pace of starts for single-detached urban homes rose 8% to 48,918 units.
The annual pace of rural starts was estimated at 21,296 units.
The six-month moving average of the monthly seasonally adjusted annual rate was 255,735 in February, down 2% from 259,830 units in January. “After hitting its lowest level since September 2020, the monthly SAAR of housing starts rebounded in February, while the six-month trend declined slightly. Among Toronto, Montreal and Vancouver, only Toronto recorded an increase in total SAAR housing starts in February, up 55%. Montreal declined 31% and Vancouver declined 43%. February’s housing starts provided much needed new housing supply nationally, but in order to improve affordability, we need to find innovative ways to deliver more supply and to keep building at a higher pace,” said Bob Dugan, CMHC’s Chief Economist.
Investment in Building Construction, January 2023
Investment in building construction increased 1.5% to $20.4 billion in January, with all components posting gains. The residential sector rose 1.9% to $14.9 billion, while the non-residential sector was up 0.5% to $5.6 billion. On a constant dollar basis (2012=100), investment in building construction increased 2.4% to $11.9 billion.
Ontario drives residential sector
Investment in residential building construction advanced 1.9% to $14.9 billion in January after posting four consecutive monthly declines at the end of 2022.
Single-family home investment was up 2.4% to $8.0 billion. Ontario accounted for much of the gain with its largest increase since December 2021.
Multi-unit construction increased 1.3% to $6.8 billion, mostly driven by Ontario (+5.2%). On the other hand, Quebec continued to contract, with its eighth consecutive decline since reaching its peak in May 2022.
Minor gains in non-residential sector
Investment in non-residential construction continued to climb, up 0.5% to $5.6 billion in January.
Industrial construction investment rose 1.1% to $1.1 billion and was up 25.0% year over year. This was the 14th consecutive monthly increase in this component.
Commercial construction investment edged up 0.1% to $3.1 billion. Manitoba continued to climb for the fifth consecutive month, approaching pre-COVID-19 pandemic levels of investment in this component.
Institutional construction investment was up 0.7% to $1.4 billion. Overall, eight provinces reported gains, with New Brunswick posting its eighth consecutive monthly increase. Conversely, Newfoundland and Labrador posted its 15th consecutive monthly drop.
Source: Statistics Canada