The Canadian housing market has cooled from last year’s record breaking highs, but low inventory is keeping prices high across the country.
Last year the Canadian housing market shattered its all-time sales record, posting the highest number of sales in history. A year later, activity has mellowed from 2020’s record-breaking summer, but prices are still climbing because fewer people are putting their properties on the market.
In its monthly National Statistics report, the Canadian Real Estate Association said home sales have continued to slow down from March, arguably the market peak of 2021 so far.
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“While the moderation of sales activity continues to capture most of the headlines these days, it’s record-low inventories that should be our focus,” Cliff Stevenson, Chair of CREA, stated in July’s market report. He noted there are “extremely unbalanced housing markets all over the country.”
Here’s what we’ve learned about the Canadian housing market from CREA’s July 2021 statistics.
Sales are plummeting
July’s home sales failed to break their 2020 record, with actual (not seasonally-adjusted) sales dropping 15.2 per cent yearly. Still, last month ranked as the second-best month of July on record, says CREA.
National home sales declined 3.5 per cent from June to July, the smallest of four consecutive declines observed since March. From March’s market peak, sales have now fallen a cumulative 28 per cent, but activity is said to still be “historically quite active,” according to CREA.
The drop in monthly home sales was not equal across the board in July. Sales were still down in roughly two-thirds of local markets last month, but declines were led by Calgary and Edmonton.
High demand versus low supply problem is worsening
It’s no surprise that we’ve been seeing a market slowdown since March, Shaun Cathcart, CREA’s Senior Economist, said in the report. The slowdown in sales isn’t necessarily a sign that things are starting to look a bit more normal.
“[We] are not returning to normal, we are only returning to where we were before COVID, which was a far cry from normal,” said Cathcart. “The problem of high housing demand amid low supply has not gone anywhere – it’s arguably worse.”
Number of available new homes dropped again
From June to July, the quantity of newly listed homes dropped 8.8 per cent, a trend that was spearheaded by fewer new homes in Montreal, Calgary, Vancouver and the Greater Toronto Area. Across Canada, new supply was down in 75 per cent of markets last month.
The drop in new listings boosted the national sales-to-new listings ratio to 74 per cent, up from 69.9 per cent in June.
At the end of the month, there was 2.3 months worth of home inventory in July, unchanged from the previous month. CREA considers this to be extremely low, and an indication of a strong seller’s market on the national and local market levels.
Prices continue to march upward
While July sales did not surpass their 2020 record, home prices shot upwards on a yearly basis.
Last month, the actual (not seasonally adjusted) national average home price hit a little under $662,000, a 15.6 per cent annual increase. Expensive properties in the Greater Vancouver Area and GTA heavily influence the national price average — by cutting these high-priced markets from the national average, July’s price falls by $132,000 to $530,000.
The Aggregate Composite MLS Home Price Index (MLS HPI) rose 0.6 per cent from June to July, continuing the trend of decelerating growth that has been observed since March, CREA noted. Canada’s most expensive provinces, British Columbia and Ontario, reported average year-over-year price growth of 20 per cent and 25 per cent, respectively.