The national housing market slowed last month with sales and prices tumbling between July and August as the Bank of Canada’s latest interest rate hike rattled buyers.
The Canadian Real Estate Association (CREA) revealed Friday that seasonally adjusted sales totalled 38,345 in August, down 4.1% from July. The actual number of sales amounted to 40,257, up 5.3% from a year earlier.
The market’s softening could be a welcome sign for buyers, who watched housing costs soar through much of the Covid-19 pandemic only to be handed a quick succession of interest rate hikes as prices began to fall.
The Bank of Canada dealt prospective buyers another blow in July, making August the first full month in the new interest rate environment.
However, CREA chair Larry Cerqua saw some stability returning to the market, despite sales being pulled lower in August by declines in Greater Vancouver and the Fraser Valley in B.C., Montreal, Ottawa, Hamilton and Burlington, Ont., as well as London and St. Thomas, Ont.
“With sales slowing and new listings returning to more normal levels, demand and supply are continuing to come into better balance” he said in a press release.
“This is giving buyers more time and more choice.”
Cerqua’s observations were based on new listings hitting 69,438, a 5.5% rise from the prior August. The seasonally-adjusted number reached 68,276, up less than 1% from July.
“More new listings are coming to the market, especially compared to the spring when there was a dearth of selection,” Robert Kavcic, a senior economist with BMO Capital Markets told investors in a note ahead of CREA’s release.
“And, with mortgage rates well above spring levels, that has taken all the steam out of prices.”
Marc Desormeaux, principal economist with Desjardins, said the CREA figures don’t necessarily signal a long-term downward trend for prices.
“Although this report indicates that short-run housing demand and supply are increasingly aligning, a return to affordability isn’t imminent. Mortgage carrying costs remain elevated, and we still don’t anticipate that the Bank of Canada will reduce interest rates until the first quarter of 2024 at the earliest,” he wrote in a economic note.
“Moreover, despite surging new listings, updated CHMC estimates published earlier this week confirm that long-run homebuilding trends are woefully insufficient to meet the needs of a rapidly growing population.”
The seasonally adjusted average price of a home in August fell 2.3% from July to $674,184, while the actual price was up 2.1% from a year earlier to $650,140.
While prices are stabilizing at the national level, CREA noted regional differences are re-emerging.
Price growth has remained solid in Quebec and the East Coast, followed by British Columbia and the Prairies, it said.
“Ontario is now a mixed bag, still with some of the bigger increases but also some of the bigger declines.”