The national housing market is making a slow-but-steady return to sanity, according to the latest numbers from the Canadian Real Estate Association.
The June data show home sales continue to slow down from March levels, marking the third consecutive month-over-month decline at -8.4% from May. Sales are still up 13.6% from last June, but the days of year-over-year triple-digit comparisons appear to be well behind us, with activity down in 80% of local markets.
The average national home price clocked in at $679,000, up 25.9% from the same month in 2020, but largely flat from May. Stripping out Toronto and Vancouver would lower it by about $135,000, according to the national association.
As the summer market gets underway, it’s clear buyer demand is starting to return to seasonal normalcy, and that the urgency that underpinned demand during the pandemic is starting to unwind. While many markets across Canada are still very competitive from a historical perspective, today’s home buyers are likely having an easier time than they would have in March, as there’s less overall demand and upward pressure on prices. In other words, while bidding wars and multiple-offer situations are still prevalent in hot markets, they’ve been reduced to a simmer from the high boil of the record-breaking winter market.
Home Prices Still Rising, but at a Slower Pace
According to CREA, Ontario markets have seen the highest average annual price growth in the range of 30%, though the largest increases are happening outside of the Greater Toronto Area market. British Columbia is experiencing average gains of around 20%, again with most growth happening outside of its major city centre. In contrast, Montreal is outperforming the rest of Quebec with an increase of 25% compared to 15% elsewhere, while the prairies and Maritimes are seeing prices up between 10 – 15%.
The MLS Home Price Index, which strips out the highest and lowest market extremes, is up 25% – a record for the month of June. However, CREA thinks this marks the end of the trend, and that the pace of price growth will slow from here on out.
At Least Half of Canada is in a Sellers’ Market
As has long been the case, one of the biggest challenges facing home buyers is a lack of supply – the number of new listings was flat at -0.7% between May and June. That continues to shift the market’s power dynamic in favour of sellers, with a national sales-to-new-listings ratio (SNLR) of 69.2%.
This ratio, which is calculated by dividing the number of sales by the number of new listings brought to market over the course of the month, determines the level of competition in the market. A range between 40 – 60% indicates a balanced market, while below and above this threshold indicate buyers’ and sellers’ markets, respectively.
While today’s ratio reveals prominent sellers’ markets across the country – at least half of local markets are in one – this trend has slowed substantially from the 90.8% SNLR recorded in January. However, it remains quite elevated from the long-term average of 54.6%.
The number of months of inventory (a measure of how long it would take to full sell off all available homes for sale) sat at 2.3 months in June, up slightly from 2.3 in May and the 1.8 in March. This indicates the supply issue has minimally improved, but is still below by half of the long-term average of five months.
What’s Next for the Housing Market?
The summer months are typically the slowest of the year for real estate, but the lull will be temporary. All signs point to a seasonally busy fall, especially as Canada’s borders re-open to international home buyers. This will put added pressure on already constrained listings, and signals additional policies are needed to add supply to the market says CREA Senior Economist Shaun Cathcart.
“It feels like maybe the theme of this summer is ‘slowly getting back to normal,’ in our own lives and for many housing markets across Canada as well,” he states in CREA’s report. “That said, it’s a long road to get back to normal, and for many housing markets the main issue is that supply shortages are as acute as ever. At the same time, the break we’ve had on the population growth side of things is likely now coming to an end. So while the frenzy and emotion of earlier in the pandemic seem to have dissipated for now, the key ingredients of a seller’s market are all still in place.”