On Thursday, June 15, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of May 2023. 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:
While most of the 2023 housing story has been playing out as expected—specifically the rebound in demand and prices—there’s one striking element that has been harder to grasp.
That is the historic drop-off in monthly new listings over the last year—down 46% between February 2022 and March 2023.
Sales have only just bounced back to average levels over the last two months, but because those buyers are chasing so few listings, we’re back in a seller’s market.
I’ve seen a few listings near me accepting offers on a particular day, although certainly not the majority. This practice could become less frequent this summer with the Bank of Canada hiking rates again in June (and likely in July).
My understanding from speaking with REALTORS® is that we’ve been on the borderline of one vs. potential multiple offers, unlike during the pandemic, where the seller was getting upwards of 10 offers. It’s possible that a decent pre-emptive offer is the bird in the hand a seller is willing to accept at this point. As of May, we’re teetering between these two options.
As analysts, we use our data as a “view from orbit” to identify the “what,” but being around the kitchen table, so to speak, is often where you find the perspective to get to the “why?”.
We know demand for housing in Canada is off the charts and that will not change. The big question that needs an answer to understand the resale market in 2023 is: why are there so few new listings each month?
Firstly, existing owners supply (or don’t supply) the market.
Nearing the end of 2022 and in early 2023 I had suggested the 2023 spring market would be a good opportunity for existing owners to move around as they did before the pandemic, exploring different options, taking their time, negotiating with sellers, home inspections, writing conditional offers, etc. While that wasn’t wrong, it also wasn’t whole story.
We’re still in a “buy first” market so when sales bounced higher in April, I assumed we would see an associated bump in new supply as those buyers then put their current homes up for sale. We would then watch the market churn away through the summer and fall with more buying and selling up and down the property ladder.
There was a bit of a bump in new supply in May but not nearly what would be expected if the market were churning away like it was in 2021.
What gives?
Well, it took longer than I would care to admit for this to click, but I think it has to do with how fast interest rates have risen. While we read every day about people whose mortgage payments have skyrocketed over the last year, there are a substantial number of existing owners out there with ultra-low fixed rates that are good until 2025 and 2026.
They are going to hold onto those rates for dear life in the hopes of riding out the worst of the current inflation crisis. Moving now would upset a sweet deal.
May saw a bounce off the bottom for new supply, suggesting some of the buyers in April were sellers in May. But the bigger picture is that much of that move-up, downsize, or “moving for whatever reason” activity will likely be stretched out over the next few years because people don’t want to mess with their once-in-a-lifetime fixed mortgage rates. In some ways, the opposite of what happened during the early days of the COVID-19 pandemic.
Learn more on creastats.ca.
