Canadian Home Sales Rose in May as Market Continued to Heat Up

Canada’s housing market continued to heat up in May, as both sales and the number of new listings rose in many cities. National home sales climbed 5.1% from April to May, according to the Canadian Real Estate Association (CREA). The national home price index rose 2.1% to $736,000 – the third consecutive monthly increase this year, but still down 8.7% from May, 2022.

“The rebound has been evident for a number of months at this point, but May really drove the point home with year-over-year comparisons for both national sales activity and national average home price back in positive territory,” CREA chair Larry Cerqua said in a statement. “That being said, the degree to which a recovery will be able to play out on the sales side as opposed to the price side will come down to supply, which remains quite low.”

The number of new properties on the market rose 6.8% month-over-month, but supply remains historically low.

Buyers rushed to the market this spring after the Bank of Canada paused rate hikes in January, sparking hopes of lower mortgage costs. However, the central bank resumed its campaign to tighten monetary policy by raising the policy rate by a quarter of a percentage point to 4.75% in June. Sales were up in 70% of local markets, including the Greater Toronto Area, Montreal, Greater Vancouver, Calgary, Edmonton and Ottawa, according to a statement released  by CREA.

Ontario cities led the increase in home prices in May. In the Kitchener-Waterloo region, the index rose 3.6%. In Mississauga it was up 3.3% and climbed 3.1% in the GTA. Meanwhile, in British Columbia, the index climbed 1.4% in Greater Vancouver, 0.7% in Victoria and 1.1% on Vancouver Island.

The sales-to-listings ratio in May was 67.9%, down slightly from 69% in April. A higher ratio indicates a seller’s market, and CREA said the long-term average is 55%.

“The 2023 housing puzzle piece that was less obvious was the reluctance of existing owners to take advantage of a slower market to make a move because they don’t want to mess with the ultralow fixed rates they locked in during the COVID-19 pandemic,” CREA senior economist Shaun Cathcart said in the release. “Without existing owners supplying the market with new listings, this housing demand rebound may play out more acutely than might have been expected on the price side this year.”

Toni Martins, a realtor serving clients in the GTA, said that while business returned to normal in March, with homes getting multiple offers, he thinks the recent interest rate hike by the Bank of Canada will push homebuyers to the sidelines again.

“We were getting around 50 to 60 showings in a well-priced property. Right now we’re getting 30,” he said. “On the other hand, we still have those people in the market that have the [mortgage] pre-approval for 120 days … those people are still buying.” Mr. Martins said many of the first-time homebuyers he’s been working with have household incomes between $180,000 and $240,000.

Bank of Montreal senior economist Robert Kavcic said in a note that, just as the market picked up in March after the central bank’s rate pause, he expects activity to slow after last week’s decision. “It stands to reason that the bank’s latest 25 basis-point rate hike will again dampen market psychology somewhat and take some steam out of recent activity,” he said.

Mr. Kavcic told The Globe and Mail that he thinks the housing market “really did play a factor in them actually raising rates at the last meeting. And if we continue to see this momentum, they will probably move again.”

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

Annual Rate of Housing Starts in Canada Fell 23% In May

Canada Mortgage and Housing Corp. says the annual pace of housing starts in May dropped 23% compared with April as starts of apartments, condos and other types of multi-unit housing projects in Vancouver, Toronto and Montreal fell. The national housing agency says the seasonally adjusted annual rate of housing starts was 202,494 units in May, down from 261,357 units in April.

The drop came as the annual rate of urban starts dropped 24% to 182,842 for the month as the annual rate of multi-unit urban starts fell 30% to 139,890 units, offset in part by a 6% in single-detached urban starts to 42,952 units.

CMHC says housing starts in Vancouver fell 45% in May, while Toronto dropped 28% and Montreal declined 35% as all three cities saw increases in single-detached starts offset by large decreases in multi-unit starts. The annual rate of rural starts for the month was estimated at 19,652 units.

CMHC says the six-month moving average of the monthly seasonally adjusted annual rate of housing starts was 230,205 units in May, down 4.2% from 240,318 units in April.

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

Canada’s Housing Market Rebound Has Beat Expectations, but Don’t Expect It to Last

Canada’s housing market roared back to life this spring, with a vigour that surprised observers, and likely dismayed the Bank of Canada. Home sales rose 5.1% in May from April for the fourth monthly increase in a row, pushing activity 1.4% higher than in 2022, the first national year-over-year sales increase in almost two years.

May’s gains followed a 11.3% spike in April that narrowed the gap with pre-pandemic levels, said RBC assistant chief economist Robert Hogue. Home sales are now just 6% below what they were in February 2020. “The recovery to date is stronger than we expected,” Hogue said in a note after the Canadian Real Estate Association released its data on June 15.

Sales were significantly up in every province, led by British Columbia, where sales increased 23%, and Ontario, where they rose 22%, he said. In real estate hot spots Vancouver and Toronto home sales surged 35% and 32%, respectively.

Prices also rose for the second consecutive month. The national composite MLS Home Price Index, which had fallen 15% from its February 2022 peak, has gained 4.1% in the past two months. The 2.1% rise in May is on par with the average monthly rate of increase seen during the market boom, Hogue said.

Some cities saw sharp increases in prices. In Ontario, Cambridge prices were up 4.9% month over month, Northumberland Hills gained 4.7%, Sudbury 4.5%, Kitchener-Waterloo 3.6%, Kawartha Lakes 3.2% and the Greater Toronto Area 3.1%.

The Fraser Valley led British Columbia gains, with a 2.4% rise month over month, Winnipeg, up 0.9%, led the Prairies and Halifax, up 1.8%, led provinces east of Ontario, Hogue said.

The reason for this sudden turnaround comes largely down to interest rates. “When exactly did the market bottom and start to swing higher again? March. Or, the minute the Bank of Canada paused its rate-hike campaign,” BMO senior economist Robert Kavcic said.

Just as the central bank’s aggressive hiking campaign over the course of 2022 sent the housing market into a downward spiral, the signal in March that the worst of rate hikes might be over once again lit a fire under demand.

But that’s not the end of the story. In June, the central bank surprised the market by raising rates by another 25 basis points to 4.75%, with the pickup in housing earning a mention in the official statement. 

The move, economists agreed, is bound to affect the real estate recovery. “It stands to reason that the Bank’s latest 25 bp rate hike will again dampen market psychology somewhat and take some steam out of recent activity,” Kavcic said.

The latest rise took commercial banks’ prime rate to a 22-year high of 6.95%. At the same time, bond yields are climbing, pushing up the shorter-term fixed-mortgage rates that have become a popular alternative to variable rates, Kavcic said. “We suspect that, as the Bank of Canada continues to lean against inflation (and has signalled an awareness of this rekindled housing-market strength), recent momentum will settle down and stabilize through the rest of the year,” he said.

RBC also believes the current strength in the market will not likely be sustained for the rest of the year. “Our forecast for another 25-basis-point rise in the Bank of Canada’s policy rate should cool demand by a few degrees — at least for a time,” Hogue said.

What RBC expects will happen is that the spring growth spurt will settle down into a more gradual recovery of prices and sales until the Bank of Canada starts cutting rates in 2024. “That said we’ve been surprised by the market’s vigour to date and we could certainly continue to be going forward,” Hogue said.

Source: Financial Post