Canada’s housing market is continuing to slow from its COVID-induced peak, according to the latest numbers from the national board. The July data from the Canadian Real Estate Association reveals home sales fell for the fourth consecutive month, by -3.5% from June, and marking a -15.2% drop from the same time last year.
Overall, sales activity is down 28% from this March, which is now considered the peak of the 2021 market. Two thirds of all markets experienced a drop, with the largest in Edmonton and Calgary, a turnaround from the robust demand in those cities earlier this summer. However, it’s important to keep in mind that these annual comparisons are in contrast to unprecedented hot market conditions in 2020; CREA points out that this July can still be considered the second-best of all time in terms of sales.
The average national home price continues to increase, rising 15.6% year over year to $662,000, while the MLS Home Price Index rose 0.6% month over month, and 22% from 2020.
Related Read: GTA Home Sales Fall Below 2020 Levels in July
“The slowdown we’ve seen in home sales over the last few months has not been surprising, given that the level of activity we were seeing back in March was unsustainable,” stated Shaun Cathcart, CREA’s Senior Economist, in the association’s July release. “But we are not returning to normal, we are only returning to where we were before COVID, which was a far cry from normal. The problem of high housing demand amid low supply has not gone anywhere – it’s arguably worse. And after years of everyone agreeing that medium-density housing was the future, we are still referring to it as the ‘missing’ middle.”
Too Few Homes for Sale is Main Market Challenge, Say Analysts
While much of the focus is on the decline in sales, buyer demand is alive and well, says CREA’s Chair Cliff Stevenson – it’s the lack of supply that is truly constraining the market. “While the moderation of sales activity continues to capture most of the headlines these days, it’s record-low inventories that should be our focus,” he stated. “We still have extremely unbalanced housing markets all over the country, so your best bet is to consult with your local REALTOR® for information and guidance about buying or selling a home in these still unprecedented and challenging times.”
CREA’s data shows new listings fell in three quarters of all markets by a total of -8.8% from June, with the Greater Toronto Area, Montreal, Vancouver, and Calgary experiencing the steepest declines.
Many Markets Back in Sellers’ Territory Compared to June
This has led to an even tighter sales-to-new-listings ratio (SNLR) of 74%, up from 69.9% in June. This ratio measures the level of buyer competition in the marketplace, and is calculated by dividing the number of sales by the number of new listings over the course of the month. A range between 40 – 60% indicates a balanced market, says CREA, with below and above that threshold indicating buyers’ and sellers’ markets, respectively. The long term Canadian average SNLR is 54.7%.
Because this ratio has tightened up, a small majority of local markets can again be considered sellers’ markets, compared to the more balanced conditions in June. Overall inventory of homes for sale currently sits at 2.3 months – unchanged from June, which could indicate the market is stabilizing, but below the historic average by more than half.
It’s clear sellers are likely hesitant to list right now, as home price growth is perceived to be slower than in the spring, in addition to it being the seasonally slower summer market. While it remains to be sees whether sales will pick up in the fall, home prices are likely to continue to rise, as Zoocasa has projected for the Greater Toronto Area.