Canadian home sales are coming down from the all-time record high hit earlier this year. Seasonally adjusted home sales fell in May, shows Canadian Real Estate Association (CREA) data. Home sale activity still remains elevated, even printing another monthly record. However, sales dropped in 80% of markets across the country, and are falling fast. With factors like interest rates still in favor of buyers, this may be showing a change in sentiment.
Canadian Home Sales Fell 7% In May
Canadian home sales through the MLS fell last month, but remain robust. Seasonally adjusted sales were reported at 56,156 in May, down 7.4% from the previous month. Unadjusted sales were 103.6% higher than a year before, but the rate had little meaning. Since this is heading in two different directions, let’s add a little context so it makes more sense.
Canadian Real Estate Sales
The unadjusted sales for all home types, as reported through the Canadian MLS.
Source: CREA; Better Dwelling.
Home Sales Fell Sharply From Peak Activity
Falling monthly home sales show some degree of market cooling from peak activity. In March, home sales on the MLS reached an all-time record high, as the market reached its fevered pitch. The month afterward it fell sharply from the squeeze. May followed with a second monthly decline in sales. Slower than peak, but busier than the market would typically be at this time.
Even With The Drop, It Was A Record May
Home Sales Fell In 80% of Markets, Showing This Is Isn’t Regional
The rate of annual growth for home sales looks astronomical, but there is a huge skew in the data. Last May, the rules for homebuyers weren’t yet clarified and had most people stuck at home. This artificially restricted activity, causing a base effect. Home sales are 103.6% higher than last year, but “only” 26.7% higher than the 10-year median for May sales prior to that. Still very large growth, just not quite as large as the base effect makes it seem. It’s still a record high for the month of May, which gives an idea of how overheated the market was earlier this year.
Canadian May Real Estate Sales
The unadjusted number of home sales for all types, as reported through the Canadian MLS for the month of May.
Source: CREA; Better Dwelling.
CREA said earlier this year they expect home sales to cool naturally, and it’s happening. About 80% of markets have seen a decline in home sales, according to them. This indicates it’s not just a regional issue that’s causing a slowdown, but a country-wide one. Since most factors like interest rates haven’t changed much, one can conclude it’s just a shift in sentiment.
CREA said this may be due to positive factors, such as high vaccination rates. As the economy gets back to normal, more people will resume doing activities outside of the home. This involves a little extra money, and helps to break the obsession with housing one faces when stuck at home. Combine this with fewer people able to buy at these levels, and it’s been a popular take from economists.
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I’ve been looking to upgrade from my condo to a semi or townhouse, and I would honestly rather wait and see prices rise another $50,000, instead of jumping into this market where you can easily get screwed.
I wish recent home buyers luck, but I won’t do bidding wars with 20 other people while home sales are falling.
Yeah opting out is the only power you have in an overheated housing market. I think it’s probably smart to wait until all the stimulus is withdrawn and things settle back into the new post-pandemic normal.
Always fun to watch people bid up prices as sales volumes fall and buyers exhaust. Good luck to all, and may the profits be in your favor.
Is this “the” Trader Jim or just a comment name? I have just begun reading GBE.
How much demand has been pulled forward by low rates, squeezing buyers into March?
Canada managed the downturn like the recovery, and now everything needs to come down from stimulus to see where things are.
What did BMO say the other day? They crammed 15 years of home price gains into some markets? It’s hard to imagine anyone would still be entertaining sales won’t have to pull down to even LOWER than baseline sales.
Low rates are borrowed future demand stimulus. Eventually the people you borrowed catch up.
I read somewhere that this hot housing market is similar to toilet paper demand that no one even knew why they should buy so many but we were still buying! Similar case was with bread baking ingredients and bread maker machines, office chairs and desks, bicycles, hiking boots, etc…The next item to be expensive and scarce would be vacation packages, flights and hotel reservations. mark my word! 🙂
LOL! That was Bank of Montreal, of all people. When our banks think we’re idiots, we’re probably idiots.
I have been following this site “Better Dwelling” for years and always so negative that houses townhouses semis condos they are all coming down and the only thing I see is prices going UP UP and UP and in here they tell you screaming sales are down but they do not tell you that prices keep going up . I you listen to Better Dwelling you will be left behind , sorry to say .Thank God i never listen to these gloom and doom
You don’t sound like you’re really smart enough to have followed this site very long, because you’re complaining about a neutral analysis that you don’t like.
From CREA economists this morning in my inbox at nation newspaper: “fresh lockdowns but with the take up in the vaccination rate, so maybe we all finally have something else to think about other than housing and being stuck at home all the time.”
They literally came to the same conclusion as the industry, but you whiney nasal “I don’t wikey the media” types always complain when you don’t like what you read. m
If you think a non-productive asset like housing has no risks associated with prices vastly out-performing inflation, then I guess that’s fine. But it’s not a logical thought process.
Did people miss out on capital appreciation not buying Canadian housing up until now? Of course they did. But the same could be said for investors that didn’t buy Enron stock in the ’90s, except it’s worse because Enron as a company actually produced things, and your Canadian house produces nothing other than debt, and crummy rental yields.
When the headline is sales fall 80% in Canada you will get my interest.
CRB is probably getting cut $800 a month. Your wish may be granted sooner than expected.