Canada home sales feel impact of rate hikes

Sales numbers declined in three-quarters of all local markets last month, CREA says

Canada home sales feel impact of rate hikes

Canada’s home sales decelerated for the fifth straight month in July amid the central bank’s sharp interest rate hikes, according to the Canadian Real Estate Association (CREA).

The total number of transactions made over Canadian MLS systems dropped by 5.3% between June and July, with sales activity slowing down in fully three-quarters of all local markets. The largest declines were seen in the Greater Toronto Area, Greater Vancouver and the Fraser Valley, Calgary, and Edmonton, CREA said.

“July saw a continuation of the trends we’ve been watching unfold for a few months now: sales winding down and prices easing in some relatively more expensive parts of the country as well as places where prices rose most over the past two years,” said Jill Oudil, chair of CREA.

“That said, the demand that was so strong just a few months ago has not gone away, but some buyers will likely stay on the sidelines until they see what happens with borrowing costs and prices. As they re-enter the market, they’ll find a bit more selection, but not as much as might be expected.”

Read more: Canada house prices – could a 25% drop be coming?

The number of new listings decreased by a similar rate of 5.3% on a monthly basis in July, bringing the sales-to-new listings ratio to 51.7% – a level slightly below the long-term average of 55.1%.

Across Canada, an average of 3.4 months of housing inventory remained as of the end of July, a significant recovery from the all-time low of 1.7 months seen during the early months of 2022.

The actual non-seasonally adjusted national average home price fell by 5% annually to reach $629,971. This level was heavily influenced by Toronto and Vancouver, with CREA remarking that excluding these two regions from the calculation shaves off $104,000 from the national average price.

“It’s only one month of data at this point but it suggests that some sellers are also playing the waiting game, and that is with an overall inventory of homes for sale that is still historically low,” said Shaun Cathcart, senior economist at CREA.

“The Bank of Canada is also expected to finish up their remaining rate hikes (100 basis points or so) over the next few months, which five-year fixed mortgage rates have mostly already priced in. We’ve already witnessed a sharp housing market adjustment this year, but it will hopefully be short-lived if conditions continue to show signs of stabilizing.”