Sales of existing homes continued to moderate in August following the Bank of Canada’s latest interest rate hikes in June and July.
Sales fell 4.1% from July and are now 10% below their pre-pandemic level, according to the latest monthly data from the Canadian Real Estate Association. Provincially, the largest drops were seen in British Columbia (-10.9%), Ontario (-6.2%) and Quebec (-4.9%).
Average home prices were also down 2.3% on a monthly basis to an average (not seasonally adjusted) price of $650,150.
However, the MLS Home Price Index, which accounts for seasonality and differences in property types, posted a slight 0.4% increase on both a monthly and annualized basis.
"August was the first full month of housing data following the Bank of Canada’s July rate hike, so a dip in activity was expected," said Shaun Cathcart, CREA's Senior Economist. "The demand is obviously still there, and it will be back, but as the housing affordability crisis re-emerges as a top policy issue, for now, the slowdown on the buyer side should help keep a lid on prices."
Inventory on the rise
With sales slowing and listings returning to normal levels, supply and demand is "continuing to come into better balance," noted CREA chair Larry Cerqua.
New listings rose 0.8% in the month, marking its fifth straight increase. This caused the sales-to-new-listings ratio to ease to 56.2%, CREA reported, down from 59% in July and the peak of 67.4% reached in April. Meanwhile, the months of inventory measure rose to 3.4 months, up from 3.2 months in July.
"Another sign of a loss of momentum in the real estate market is the proportion of listings cancelled during the month, which continues to rise, a sign that some sellers are discouraged by recent interest rate hikes," noted National Bank economist Daren King.
Strength in Alberta and Atlantic Canada
But the latest data also show that not all housing markets are the same. This is especially true of those in Alberta and the Atlantic provinces, where resales bucked the national trend by trending higher.
Sales were up primarily in Newfoundland and Labrador (+18%) and Alberta (+2.8%).
"Looking across the country, we're now seeing some clear regional discrepancies after a period where most markets were moving largely in synch," noted BMO economist Robert Kavcic, who pointed out that Calgary "remains the strongest market in Canada."
A similar situation is unfolding in Atlantic Canada, where some markets are seeing prices back at their 2022 highs.
"What do these regions have in common? Relative affordability and net provincial migration inflows that are supplementing international immigration," Kavcic wrote. "Translation: People are moving there because they can live affordably."
Existing home sales data for September is expected to be released on October 16.