On Thursday, September 15, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of August. Below, CREA’s Senior Economist Shaun Cathcart provides an update on the current state of housing markets in Canada and explains what the data means for members:
I know I’m starting to sound like a broken record, but in a lot of ways the August housing data for markets across Canada was a lot like April, May, June and July—still slowing, but at a slowing rate.
After more than a decade of warnings that “higher interest rates are just around the corner,” it’s been quite a shock to see rates go from all-time lows to above what would be considered “back to normal” so quickly.
Both housing activity and prices have understandably softened in the face of 300 basis points of rate hikes from the Bank of Canada in the space of just six months. With rates now thought to be nearing a top (as of late that’s up for debate), it looks like declines in the housing stats are also winding down. It helps that unemployment is at record-lows, which is why supply is not piling up.
August saw national sales pretty much hold steady from month-to-month for the first time since February along with a stabilization of demand/supply conditions in many markets.
The National Composite MLS® Home Price Index (HPI) edged down 1.6% on a month-over-month basis in August 2022, not a small decline historically, but smaller than in June and July.
So, we have sales and market conditions stabilizing, and price declines getting smaller.
I think a lot of prospective buyers still sitting on the sidelines may want to see a clearer bottom for prices along with a clear message from the Bank of Canada that they are finished with rate hikes for a while before they enter the market. We aren’t there yet, but maybe soon.
That said, as we wind up the first summer vacation season in three years that was mostly “normal” (meaning less public health restrictions), I’ve been seeing sold signs popping up around my neighbourhood. I can’t help but think of what happened at this time last year—a big slowdown during the summer. It was followed by a surprise return of buyers in the fall.
This year is obviously different. Supply is still low, but it’s up from last year which is good for buyers. Though, these days buyers are facing a much tougher stress test to get into the market.
Still, after a sharp adjustment in housing markets this year in response to the first real inflation crisis in our three-decades long inflation targeting era, I do wonder if the next surprise will once again be to the upside, as has so often been the case with Canadian housing markets in recent years.
The demand hasn’t gone away, but the question is when will it come back off the sidelines? The key stat to keep your eye on is inflation here and south of the border.
Learn more on creastats.ca.
