On Monday, August 15, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of July. 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:
We all know most housing market metrics are down compared to last year, so now the question is whether the slowdown is slowing down or getting worse? An increasing number of data points suggest the former.
National home sales were down 5.3% from June to July, but that’s smaller than the declines in March, April, May and June. Deceleration in this trend is a good thing. Are we coming in for a landing?
New listings were also down 5.3% year-over-year in July—the same size as the decline in sales and in many of the same markets. That’s good. A worry in a housing adjustment like this is a flood of supply into the market, but typically, the main factor there is the unemployment rate, which is near a record low. You have sellers who look like they’re also going to hang out on the sidelines for a bit, and that is critical for keeping the market from getting out of balance.
What does market balance look like these days?
The national sales-to-new listings ratio is near 50% at this point—more or less average and, more importantly, no longer falling. Coming in for a landing?
While the overall number of properties on the market is up a bit in recent months, it’s still historically low. Just over three months (3.4 to be exact) of inventory nationally at the end of July is still technically a seller’s market. The month-over-month increase in national active listings in July was also the smallest since January—more deceleration.
What about inflation?
The main culprit behind all of this change? Inflation was still high at 7.6% year-over-year in July, but that’s less than in June and less than in May. Another deceleration.
As a result, the Bank of Canada might wind down their tightening cycle a little sooner than expected. Maybe 75 basis points more this year and hopefully they’re done.
And lastly, home prices. The National Aggregate Composite MLS® Home Price Index (HPI) edged down 1.7% in July compared to June. That was not a surprise. The key is that, once again, that decline was smaller than the one in June, which was the first sign of coming in for a landing on the price side.
Let’s recap:
- Sales look like they are coming in for a landing;
- prices are also now showing signs of coming in for a landing;
- inflation is finally winding down;
- Bank of Canada rate hikes are nearing a stop;
- the supply of homes for sale is still historically low; and
- some new supply is waiting on the sidelines.,
The combination of these factors is keeping the market from getting out of balance.
Rising rates may have sidelined some buyers, but others have likely sidelined themselves while waiting to see things stabilize. We are starting to see more signs that’s happening in the data.
Learn more on creastats.ca.
