MLS sales fall in April
OTTAWA – In yet another sign the Canadian housing market is cooling, at least to a small degree, the Canadian Real Estate Association (CREA) has reported sales in the month of April 2022 through its Multiple Listing Service (MLS) fell on both a month-over-month and year-over-basis even though the national average price continued its upward trend. The number of new listings of properties for sale also fell last month.
The realtors’ group noted national home sales dropped 12.6% on a month-over-month basis between March and April 2022 – falling to their lowest monthly level since the summer of 2020 – while actual (not seasonally adjusted) monthly activity came in 25.7% below the monthly record set in 2021.
Sales were down in 80% of local markets, led mainly because of its size by the Greater Toronto Area (GTA) as most other large markets also posted double-digit month-over-month declines in April. The exceptions were Victoria, Montreal and Halifax-Dartmouth where sales edged up slightly.
The actual number of transactions in April 2022 came in 25.7% below the record for the month set last year although it was still the third-highest April sales figure ever behind 2021 and 2016.
“Following a record-breaking couple of years, housing markets in many parts of Canada have cooled off pretty sharply over the last two months, in line with a jump in interest rates and buyer fatigue,” CREA chairman Jill Oudil said in a statement. “For buyers, this slowdown could mean more time to consider options in the market. For sellers, it could necessitate a return to more traditional marketing strategies.”
“After 12 years of ‘higher interest rates are just around the corner’ here they are,” CREA senior economist Shaun Cathcart added. “But it’s less about what the Bank of Canada has done so far. It’s about a pretty steep pace of continued tightening that markets expect to play out over the balance of the year, because that is already being factored into fixed mortgage rates.
“Of course, those have, for that very reason, been on the rise since the beginning of 2021, so why the big market reaction only now?” he continued, “It’s likely because typical discounted five-year fixed rates have, in the space of a month, gone from the low 3% range to the low 4% range. The stress test is the higher of 5.25% or the contract rate plus 2%. For fixed borrowers, the stress test has just moved from 5.25% to the low 6% range – close to a 1% increase in a month! It won't take much more movement by the Bank of Canada for this to start to affect the variable space as well.”
The number of newly listed homes edged back by 2.2% on a month-over-month basis in April, with a fairly even split between markets where they rose and those where they fell. Notable declines were seen in the Lower Mainland and Calgary while listings jumped higher in Victoria and Edmonton.
With sales falling further than new listings, April’s sales-to-new listings ratio eased back to 66.5% – its lowest level since June 2020 and on the border between what would constitute a seller’s and a balanced market.
There were 2.2 months of inventory on a national basis at the end of April 2022, still historically very low but up from slightly lower readings in the previous eight months. The long-term average for this measure is a little over five months.
The actual national average home price was a little over $746,000 in April 2022, up 7.4% from the same month last year.
Excluding the GTA and the Greater Vancouver Area – this country’s two largest and most expensive housing markets – cuts $138,000 from the national average price.
In her research note, Rishi Sondhi of TD Economics, said while buyers’ fatigue may have played a role in April’s sales decline, she still expects a steep downtrend in sales though the rest of 2022 as higher interest rates eat away at affordability.
She also pointed out the GTA seems to have become an outlier as sales and prices dropped more than in the country overall and supply/demand balances are now close to favouring buyers, reminding her readers “that Toronto experienced one of the worst affordability erosions of any major CMA during the pandemic.”
However, she appears to be believe prices will either moderate or fall, “reflecting the cooler demand backdrop.” However, certain segments of the market, such as detached houses, could see continued price upticks.
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