OTTAWA – The number of homes sold via the Multiple Listing Service (MLS) of the Canadian Real Estate Association (CREA) dropped 6.7% on a month-over-month basis in June, the largest monthly decline since June 2010 while marking the third consecutive month of declining sales. Sales are not 14.1% below the record set this past March.
The realtors’ group also noted that actual sales fell last month by 11.4% from the level seen in June 2016. Meanwhile, the number of newly listed hosts edged back 1.5% while the national average price gained a measly 0.4% on a year-over-year basis.
CREA reported monthly sales were down in 70% of all local markets, led overwhelmingly by the Greater Toronto Area (GTA). Monthly declines were also posted in the Golden Horseshoe, the Lower Mainland of British Columbia, Kingston, Montreal and Quebec City.
The 11.4% drop in actual (not seasonally adjusted) sales was driven by a significant drop in GTA sales activity as half of all local housing markets recorded a decline in year-over-year sale, CREA reported while noting Calgary, Edmonton, London and St. Thomas, Ottawa, Montreal and Halifax-Dartmouth topped the list of Canadian cities where home sales surpassed year-ago levels.
“Canadian economic and job growth have been improving, which is good news for housing demand,” CREA president Andrew Peck said in a statement. “However, it also means that interest rates have begun to rise, which may impact homebuyer confidence – particularly in pricier markets like Toronto and Vancouver where recent housing policies had already moved potential buyers to the sidelines. In lower priced markets, the effect of higher interest rates on housing affordability will be relatively muted.”
“Changes to Ontario housing policy made in late April have clearly prompted many homebuyers in the Greater Golden Horseshoe region to take a step back and assess how the housing market absorbs the changes,” CREA chief economist Gregory Klump noted. “The recent increase in interest rates could reinforce a lack of urgency to purchase or, alternatively, move some buyers off the sidelines before their pre-approved mortgage rate expires. In the meantime, some move-up buyers who previously purchased a home before first selling may become more motivated to reduce their asking price rather than carry two mortgages.”
The number of newly listed homes slid 1.5% in June, led by a sizeable pullback in the GTA compared to record levels in April and May. A number of other markets in the Greater Golden Horseshoe also saw a pullback in new supply.
The national sales-to-new listings ratio moved further into balanced market territory at 52.8%. The ratio had been in the high-60% range just three months earlier. A sales-to-new listings ratio between 40 and 60 is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.
The ratio was above 60% in fewer than half of all local housing markets in June. The majority of markets above 60% are located in B. C. and Ontario, but a number of Greater Golden Horseshoe markets have downshifted into balanced territory. The ratio fell below 40% in the GTA and Barrie.
The actual national average price for homes sold in June 2017 was $504,458, up just 0.4% from where it stood one year earlier.
Excluding Greater Vancouver and Greater Toronto – Canada’s most active and expensive housing markets – trims the national average price to $394,660.
“The Canadian housing market is now in its third month of what is expected to be a soft landing,” Diana Petramala of TD Economics pointed out in her research note. “The weakness was triggered by changes to provincial and federal housing policy, but it will ultimately be higher interest rates that help solidify it. Mortgage rates have moved in tandem with the Bank of Canada rate hike last week and will likely to continue to edge higher with three additional rate increases expected by the end of next year.”
She also pointed out that after growing close to 6.5% this year, existing home prices are expected to decline by 2.1% next year. “Much of that weakness will be concentrated in markets in Ontario and B.C., where households are particularly sensitive to higher mortgage rates given the stretched affordability,” she said. “Elsewhere in the country the improving economic conditions should help offset some the impact of gradual interest rate hikes with home prices and sales expected to trend higher.”