The feverish peak seen back in March was likely an anomaly
Despite the steady moderation of the housing sector over the past few months, the market might now be close to the point where this slowdown “has run its course,” according to Robert Kavcic of BMO Economics.
This is because while activity has been slowing down for most of 2021, new listings have also seen a considerable decline during the same period, with the end result of tightening the market despite the sales pull-back.
“The national sales-to-new listings ratio jumped to 74% (seasonally adjusted) in [July], and the months’ supply of homes for sale steadied at a still-paltry 2.3 worth,” Kavcic said. “Against that backdrop, prices continue to rise even if the growth has peaked (which it has). The MLS HPI was up 22.2% y/y in July, just down from the prior month, which was the fastest pace since at least 2000.”
Read more: Canada home sales – what’s happening?
This suggests that the peak seen in March was but the tail-end of shorter-term changes “that are now ebbing,” Kavcic said. Growth in the three months ending July was at 11.2% annualized, while growth over the past month was at 7.1% annualized.
“One could argue that some of those shifts went too far during the height to of the madness, and we could see some undoing ahead, even if a lot of the underlying change is permanent,” Kavcic said. “The current market balance suggests that the latter pace will roughly hold, but we’ll see how listings and sales evolve through the late-summer and fall periods.”
