Home sales recorded over Canadian MLS Systems edged up by 1.3 per cent between September and October but were also 36 per cent below the number of transactions that same month last year, reported the Canadian Real Estate Association on Tuesday.
It was the first monthly gain since February.
The number of sales also stood about 15 per cent below the pre-COVID-19 10-year average for the month.
“In October, sales across the country increased for the first time since before interest rates started to rise last winter,” said Jill Oudil, Chair of CREA. “Of course, we’ve known the demand was there, so it’s just been a matter of some playing the waiting game as borrowing costs and prices have adjusted. Moving into 2023, sellers and buyers will likely continue coming off the sidelines, but it’s a very different market compared to just one year ago.”
“October provided another month’s worth of data suggesting the slow down in Canadian housing markets is winding up,”
said Shaun Cathcart, CREA’s Senior Economist. “Sales actually popped up from September to October, and the decline in prices on a month-to-month basis got smaller for the fourth month in a row.”
CREA said there were 3.8 months of inventory on a national basis at the end of October 2022, up slightly from 3.7 months at the end of September. While the number of months of inventory is still well below the long-term average of about five months, it is also up quite a bit from the all-time low of 1.7 months set at the beginning of 2022, said the national organization.
It also said the Aggregate Composite MLS Home Price Index (HPI) edged down 1.2 per cent on a month-over-month basis in October 2022, the smallest decline since June. The non-seasonally adjusted Aggregate Composite MLS HPI edged down 0.8 per cent on a year-over-year basis in October.
“The actual (not seasonally adjusted) national average home price was $644,643 in October 2022, down 9.9 per cent from the same month last year. The national average price is heavily influenced by sales in Greater Vancouver and the GTA, two of Canada’s most active and expensive housing markets. Excluding these two markets from the calculation cuts almost $125,000 from the national average price,” added CREA.
Robert Kavcic, Senior Economist with BMO Economics, said: “Tumbleweeds continued to blow across the Canadian housing market in October, with activity very depressed as the market continues to adjust to higher interest rates. But it could be worse.”
“New listings rose 2.2 per cent in the month and are down a modest 1.3 per cent from a year ago. We’ll reiterate again that, while sales have swung wildly, new listings have held very steady through the recent turbulence and are very much in-line with pre-COVID norms. There’s just not a lot of forced selling out there at this stage, which can really exacerbate or speed up a price correction,” he said.
“Still, the market balance is soft, with the sales-to-new listings ratio weakening slightly to 51.6 per cent in October. That’s not a terrible number, as we tend to see recessionary conditions yield ratios below 40 per cent (e.g., 2009 and the early-1990s). But, it is certainly leaving buyers with much more power. Meantime, the months’ supply of homes for sale at the current sales rate rose to 3.8, which is still relatively lean by historical standards.”
Rishi Sondhi, Economist with TD Economics, said: “Absent further rate hikes, one could make the case that Canadian housing demand is approaching a bottom. Sales have already cratered by over 40 per cent since February, are trending at levels last consistently seen in 2012, and appear to have undershot levels in line with fundamentals like income and housing supply. And of course, they increased in October, bringing the three-month moving average of sales growth to -1.7 per cent, the best showing since March.
“However, we do anticipate further rate hikes by the Bank of Canada, which will continue to weigh on demand and prices. In fact, they should continue dropping through the early part of next year.
“Our current forecast sees Canadian average home prices retracing about half of the gains made during the pandemic, although how the supply picture unfolds represents a key risk to this forecast. With homeowners feeling the pinch of higher monthly payments due to rising interest rates, some may be forced into listing their properties (although so far, the level of new supply hitting the market each month remains subdued). If a sufficiently large number of these homeowners end up listing their homes, it could downwardly pressure prices by more than we anticipate.”
(Mario Toneguzzi is a veteran of the media industry for more than 40 years and named in 2021 a Top Ten Business Journalist in the world and only Canadian)
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