Canadian Real Estate Prices Slip Further On Weak Demand, Rising Inventory

Canadian real estate remains pudding-soft, despite expectations that rate cuts would firm the market. Canadian Real Estate Association (CREA) data shows the price of a composite benchmark (typical) home fell in August. Weaker demand and rising supply were the general backdrop, as lower rates motivated more sellers to jump into the market than buyers. Experts originally anticipated a market boost from further rate cuts, but now share uncertainty as dark clouds form over the labor market.

Canadian Real Estate Prices Fell Another 1% Last Month

The price of a composite benchmark (typical) home across Canada. 

Source: CREA; Better Dwelling. 

Canadian real estate prices are still on the slide as demand remains weak. The price of a typical home (composite benchmark) slipped 1.0% (-$7,000) lower to $717,800 in August. It was a slightly larger decline from a month before.   

Canadian Real Estate Prices See “Double Dip” of Negative Growth

The 12-month change in the price of a composite benchmark (typical) home across Canada. 

Source: CREA; Better Dwelling. 

Over the past 12 months, home prices have generally weakened further. Annual growth remains negative, with prices 3.9% (-$28,800) lower than last year. The benchmark is now $15.7% (-$134,200) below the record high, post adjustments for the composite. That’s enough to be considered a correction but not a crash. 

Amongst the crowd who remain skeptical of the benchmark price after last year’s changes? The average price has fallen 18.1% (-$143,100) over the same period. Slightly larger, but it’s worth emphasizing that this measure is not without its flaws either, as a shift in product (detached homes to condos) can obfuscate the change in prices. However, Canada’s weak condo demand and relatively stable detached market likely means the opposite in this case. 

Canadian Real Estate Sales Fall, Remains Weak Despite Rate Cuts 

Canadian real estate is still experiencing weak demand, even from a historical perspective. Home sales fell 2.1% to 39,600 units in August, and remain slightly lower than the years leading up to 2020. This year began stronger with anticipation of rate cuts driving activity, but that failed to materialize. It’s worth emphasizing that last year was already a weak number to slip lower. 

Canadian Real Estate Inventory Is Rising As More Sellers Look To Exit

Buyers didn’t get the message that things were supposed to pick up post-rate cuts, but sellers did. Annual inventory grew by 2.1% to 71,430 new listings in August. New listings have generally been much stronger this year, rising 13.2% year to date when compared to last year. That’s roughly 3x the sales growth rate, helping to create a better balance.  

Fewer sales but more listings helped the sales-to-new listings ratio (SNLR) slip lower. The SNLR fell 2.3 points over the past 12 months to 55.4% in August, placing it firmly in a balanced market. The industry generally believes a balanced market means prices are correct for the current level of demand. Though the ratio is slowly sliding, which can mean balanced is just a pit stop between a seller’s market (when prices rise) and a buyer’s market (when prices fall).  

Canadian real estate remains relatively weak and didn’t get the anticipated boost from rate cuts. That was largely due to the market already having access to cheaper credit via fixed rates. When the failure to launch first occurred, experts believed rates would have to be slashed much lower—at least below 4 points. However, as of this morning the narrative changed as several economists stated it’s unclear how low rates would need to fall, and whether the labor market will erode faster than rates leading to weaker demand.