OTTAWA -- Canada's housing market continued to cool last month with the country's real estate association finding home sales dropped by nearly 22 per cent since last year and almost nine per cent between April and May.
The (CREA) said Wednesday that on a year-over-year and non-seasonally adjusted basis, sales amounted to 53,720, a fall from 68,598 in May 2021. Seasonally adjusted sales for the month totalled 42,649, down from 46,644 in April.
鈥淯ltimately this has been expected and forecast for some time - a slowdown to more normal levels of sales activity and a flattening out of prices,鈥� said Shaun Cathcart, CREA's senior economist, in a release.
鈥淲hat is surprising is how fast we got here.鈥�
The moderation came after the country rang in the new year with soaring prices and a torrid pace of sales that prompted provinces and the federal government to eye a suite of cooling measures.
Ontario, for example, increased a tax on non-resident homebuyers to 20 per cent from 15 per cent in March and broadened the policy to the entire province instead of just the Greater Golden Horseshoe.
But even more impactful than the patchwork of policies has been rising interest and mortgage rates, which economists attribute much of the cooling to.
鈥淐anadians widely expected home prices to keep rising, which pulled in investors and multiple-property buyers, while also causing many households to stretch in fear of missing out,鈥� said Robert Kavcic, BMO Capital Markets senior economist Robert Kavcic.
鈥淏ut, beginning with the (Bank of Canada)'s first nudge in interest rates, those market expectations began crumbling.鈥�
Realtors now notice prospective buyers negotiating more than they were able to in previous months, while sellers are still coming to terms with how the market has shifted and some are even holding back on listing their homes.
When Sara Rowshanbin, a Chestnut Park Real Estate Ltd. broker in the Greater Toronto Area, tells her clients they can request a home inspection, their eyes light up because most buyers had to drop the condition when the market was heated previously. Now about 50 per cent of the bids she helps place have the condition again.
However, how sellers are reacting to offers made with the cooling market in mind is 鈥渁ll over the place.鈥�
鈥淪ome are receiving them with open arms and saying 'let's work together on this' and others are saying 'is that a typo?' so you can tell â鈧�¦ the market shifted very quickly,鈥� she said.
As a result, CREA found May's sales resembled the levels of activity seen in the second half of 2019, before the COVID-19 pandemic began, but noted sales decreases were steeper in April.
May sales were down in three-quarters of all local markets, led by regions like the Lower Mainland in British Columbia, Calgary, Edmonton, the Greater Toronto Area (GTA) and Ottawa.
The association now expects 568,288 properties to change hands this year, a 14.7 per cent decline from the 2021 record but still the second-highest annual figure ever. It predicted sales will edge back a further 2.8 per cent to 552,403 homes in 2023.
However, there will be little relief in prices.
CREA forecast the national average home price will rise by 10.8 per cent on an annual basis to $762,386 in 2022 and expects the largest gains to come from the Maritime provinces, Ontario and Quebec. Then, the national average home will rise by another 3.1 per cent to $786,282 in 2023.
The average seasonally adjusted price in May sat at $700,438, down nearly four per cent from $728,171 in April.
The average non-seasonally adjusted price was $711,316, up roughly three per cent from $687,595 the year before.
Rishi Sondhi, an economist with TD Economics, interpreted the figures to mean activity is 鈥渞etrenching especially hard鈥� in the GTA, where investors have played a large role in the past year.
鈥淚t's also likely the case that some GTA buyers purchased their homes before selling their old ones (thinking the market would remain hot) and are now being forced to accept lower prices to complete their transactions,鈥� Sondhi wrote, in a note to investors.
鈥淲e would, however, expect this dynamic to run its course in relatively short order.鈥�
New listings climbed 4.5 per cent on a seasonally adjusted basis from 70,971 in April to 74,145 in May, as Montreal saw an increase in new supply.
On a non-seasonally adjusted basis, new listings totalled 100,643 last month, up more than six per cent from 94,704 in May 2021.
This report by The Canadian Press was first published June 15, 2022.
