On the blazing trails of a record-setting April for Canadian home sales, residential real estate transactions inched lower in May.
Compared to April, the number of transactions reported through Canadian multiple listing service systems dropped 2.8 per cent (on a seasonally adjusted basis) according to the Canadian Real Estate Association.
While activity slowed in 70 per cent of the markets CREA tracks from coast to coast, in at least some it wasn’t due to wavering demand, suggests Gregory Klump, CREA’s chief economist.
“Many of the housing markets in BC and Ontario that led the monthly decline in national sales are also places where months of inventory have fallen to all-time lows,” says Klump in a statement.
“This suggests a lack of supply may be starting to rein in sales amid a continuation of strong housing demand,” he adds.
CREA, which has more than 100,000 members from 100 local real estate boards, posts a number of measures suggesting that the Canadian housing market continues to tighten.
On a national level, 3.2 per cent fewer listings appeared in May than in April, and the sales-to-new listings ratio — that’s sales divided by new listings for a month, and expressed as a percentage out of 100 — rose to 64.8 per cent.
A ratio above 60 per cent signals a seller’s market, and the Canada-wide ratio hasn’t been this high since October 2009.
At May’s end, it would take 4.7 months for the number of homes listed to sell if the current pace of activity persisted.
This reading has not been lower in more than six years and reflects falling supply in markets in BC and Ontario, says CREA.
BuzzBuzzHome News recently reported how in the latter province, it is not only the GTA that is tight, but outlying regions including Niagara and Hamilton are seeing bidding wars break out increasingly, too.
In commentary published today, Adrienne Warren, a senior economist at Scotiabank, writes, “A severe lack of listing[s] is fuelling sellers market conditions and ongoing rapid price gains.”
In May, the benchmark price of a Canadian home, including both single-family homes and multi-family units, was $550,000, representing a 12.5 per cent increase over the same month in 2015.
CREA explains “a ‘benchmark home’ is one whose attributes are typical of homes traded in the area where it is located.”
The benchmark price increased on a year-over-year basis in nine of the 11 major markets CREA tracked, with only Calgary and Saskatoon posting depreciation.
Gains were most pronounced in Fraser Valley, where the benchmark price was $593,800, up 31.6 per cent from a year earlier.
Last month, the benchmark was $889,100 in Greater Vancouver, the highest of any market and an increase of 29.7 per cent from where it was 12 months prior.
The Lower Mainland, Victoria, and Greater Toronto were the only other markets to post double-digit gains.
“The recent slowing in home sales in BC’s major markets and signs of some levelling off around the GTA suggest activity may be peaking amid deteriorating affordability and a severe lack of listings,” explains Warren, the Scotiabank economist.
“But overall sales are likely to remain elevated for the time being, supported by low borrowing costs, strong employment and population growth, and foreign buying,” she adds.
Although seasonally adjusted sales declined in May from a month earlier in the face of diminishing inventory, unadjusted activity — that doesn’t take seasonal swings into account — was up 9.6 per cent from a year ago and flies 15.1 per cent over the 10-year average for May.
CREA President Cliff Iverson notes a factor besides a drooping number of listings that is tempering activity.
“National sales activity is still strong, even after coming off the record levels of the past couple of months.” he states, noting, “But, there are housing markets where sales continue to reflect a cautious mood among homebuyers and uncertainty about the local economy.”