Canada

Canadian Real Estate Sales Make Largest September Decline Since 2007

Canadian real estate sales continued to slide lower, as lending gets tighter. Canadian Real Estate Association (CREA) numbers show sales across the country slipped lower in September. The largest declines were in BC, where sales fell off a cliff in the country’s most expensive market.

Canadian Real Estate Sales Decline Over 8%

Canadian real estate sales are on the slide. CREA reported 35,939 sales in September, down 12.67% from the month before. The annual pace of growth fell 8.8% when compared to the same month last year. A lot of interesting context in those numbers, beyond it’s a plain ole’ decline.

Canadian Real Estate Sales

The unadjusted sales for all home types, as reported through the Canadian MLS.

Source: CREA, Better Dwelling.

Real estate sales typically decline from August to September, so that isn’t a huge surprise. In fact, there’s only been one monthly increase over the past 10 years during that period. The point worth noting is this is the largest monthly decline for September since 2007. This September also saw the fewest sales since 2012. The sales environment is definitely worse than usual.

Canadian Real Estate Sales Change

The annual percent chage of unadjusted sales for all home types, as reported through the Canadian MLS.

Source: CREA, Better Dwelling.

Greater Toronto and Montreal Are The Fastest Growing Markets

The fastest growing markets were in Greater Toronto, and Montreal. Hamilton-Burlington saw the largest growth with 943 sales in September, up 7.89% from last year. Montreal is reported 3,213 sales in September, up 7.82% from last year. Toronto reached 6,455 sales, up 1.19% compared to last year. Both Toronto and Hamilton printed one of the worst Septembers they’ve ever had last year. The increase is better around Toronto, but they’re still seeing one of the worst months they’ve seen in recent times.

Canadian Real Estate Sales By Market

Canadian real estate sales in markets with more than 500 sales.

Source: CREA, Better Dwelling.

British Columbia Has The Fastest Falling Real Estate Markets

The fastest falling sales numbers were all in British Columbia. Vancouver led the pack lower with 1,634 sales in September, down 43.28% from the year before. Fraser Valley followed with 977 sales, down 37.37% from last year. Victoria is holding a little better with 505 sales, down 16.67% from last year. Probably best to not to ask your local BC Realtor how their month’s going.

Canadian Real Estate Sales Change By Market

The percent change in Canadian real estate sales, in markets with more than 500 sales.

Source: CREA, Better Dwelling.

British Columbia’s decline in sales is by far the most interesting takeaway. Nothing has changed with the narrative of tight rental inventory or immigration levels. Yet we’re seeing declining sales and soft condo pre-sale absorption. It looks like we’re going to see how much of the density hype was real, or if interprovincial migration is rising.

Higher rates and credit tightening are expected for as long as the economy improves. Credit is tightening faster than wages are growing, so short-term relief isn’t in the cards. Good news if you’re looking to buy and not in need of easy credit. Bad news if you’re looking to sell to someone that needs easy credit to pay your asking price.

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27 Comments

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  • Cameron M 10 months ago

    Not too worried. If sales keep slipping, we’ll be faced with rate cut and prices will rip higher. It’s actually very encouraging that sales dropped off this much, and prices are holding as well as they are.

    • Andrew Jerabek 10 months ago

      so much to unpack

    • Bluetheimpala 10 months ago

      Don’t feed the trolls. BD4L.

      • Ahmed 10 months ago

        I hear this argument so much day to day, I’m not even really sure it’s a troll. The whole real estate industry, and a good set of Boomers, are convinced the whole purpose of the BOC is to support their inflated asset values.

        • vnm 10 months ago

          Prices holding as sales collapse is always claimed as evidence of market strength at this stage of a bubble. But of course it’s delusion, fuelled by greed and desperation.
          Already, with just minor interest rate increases and a seemingly booming economy, investors are finding themselves underwater,
          and starting to drown.
          They will spout this oxygen-deprived nonsense until last breath, turning every colour of the rainbow as their eyes pop out of their sockets.

        • Raging Ranter 10 months ago

          Good point. How many hedge fund managers have been fretting about the Fed “making a mistake” in raising rates? Along with that idiot Jim Cramer (not to mention the President). There does seem to be a prevailing belief that central banks are primarily concerned with propping up asset prices. I assume this is because under Bernanke, they actually were. Bernanke stated as much in a 2010 editorial. However, those days are gone. Helicopter Ben is no longer Fed chair, and inflated asset prices are now seen as a problem in need of fixing. Central banks succeeded in inflating assets. Wanna bet they’ll succeed in deflating them?

    • Gabriele Di Bernardo 10 months ago

      Rate cuts by the central bank do not have anything at all to do with mortgage lending rates. Mortgage lending rates follow bond yields and if there is a retraction of housing here which makes up a huge chunk of our economy right now then bond yields will climb which will force mortgage rates higher. Look at historically what happened when bond yields rose in the 1980s and the 1990s… mortgage rates headed up and up and up to over 21% in the 1980s and over 14% in the 1990s. People today are worried about a lending rate higher than 4%… what do you think will happen if the rates climb up to the rates which were experienced in the 90s? It’s not a joke and a very likely situation. Since the majority of people are on variable rate mortgages a lot of people would be pretty much wiped out as they not only wouldn’t be able to make payments but also would lose their homes as home prices would drop like a stone.

      • Monetary Mayhem 10 months ago

        In unconventional monetary policy, rates are lowered and suppressed by the government’s acquisitions of bonds (which also prints money). The two are very closely related in this environment. Technically bonds and interest rates aren’t related, but in order to allow interest rates to rise, the Bank of Canada needs to stop buying bonds and providing increased market liquidity.

        • Raging Ranter 10 months ago

          BoC does not buy bonds. There was no equivalent of QE here in Canada. They haven’t bought binds since they were forced to monetize the federal deficit in 1982-83. Your understanding central banking is no better than your understanding of the 1980s economy. There’s was no assert price inflation when Interest rates were high. Consumer price inflation, yes, but assets got crushed. It wasn’t until rates came down in the mid to late 80s that housing took off.

          • Monetary Mayhem 10 months ago

            Sure they did. In 2010 they owned $30 billion in bonds. This year, almost $90 billion. That’s a lot more than just inflation on the government bonds they are holding. Total BOC assets doubled during that period as well.

            Sure, it’s not the size of the US multi-trillion dollar bond event, but it is a huge event for such a small country.

    • Raging Ranter 10 months ago

      In case you haven’t noticed, central banks all over the world are slowly waking up to the damage low rates and high asset prices are doing, and are slowly but steadily reversing course. It the will take a severe downturn to get rates back down again, and housing will not perform well in a severe downturn.

      • Monetary Mayhem 10 months ago

        Except they’ve done so much damage, they can’t pull off a recovery that won’t wreck the whole system by lifting rates in a straight line. The setup is very similar to the 1980s, where everyone bought homes in Canada to hedge against inflation. It caused massive asset inflation, and was followed by large recessions instead of a US style mega recession.

        • Raging Ranter 10 months ago

          Sorry to burst your bubble (pun intended) but Canadians emerged from the early 1980s recession with record savings. Also, rates trended down between 1982 and 1988. Contrast that to today, when Canadians are carrying record debt and rates are coming off the very bottom and are headed up

        • Raging Ranter 10 months ago

          Sorry to burst your bubble (pun intended) but there are some key differences between today and the 1980s. Canadians emerged from the early 80s recession with record savings levels. And interest rates dropped dramatically from 1982 until 1988,. Contrast that to today, with Canadians carrying record debt and interest rates with nowhere to go but up.

      • vnm 10 months ago

        It’s now being called the “everything bubble” … a 50% increase worldwide in virtually all assets over the past decade due not to economic improvements, but virtually free and easy loans.
        To determine how rich we think we are vs how rich we actually are, 50% is probably a good starting point.

  • Karl 10 months ago

    Prices in inflated markets can’t go when there’s monetary contraction. Prices can grow in markets that were underperforming. Montreal has been stagnant for 5 years, and rates are rising. People are rushing to buy before they get locked out of mortgages.

    People in Toronto and Vancouver bought before the locking out began. The lockout is now a reduction in liquidity, since prices increased so much.

    It’s not hard, why don’t people understand this? BD is doing the lord’s work by repeating credit, credit, credit so idiots understand this basic concept.

    • Chuck Brown 10 months ago

      It’s really hard to see people that don’t understand this. A million dollar home only required $125k/year household income two years ago. You may not want to pay $3500/month to service that mortgage, but it doesn’t mean other people weren’t willing to, especially in Toronto. It’s easy to clear that, and easy to see how people were buying condos at $500,000.

      As rates rise, that’s going to become harder and harder to do. As the author points out, borrowing power is shrinking faster than wages are growing, so it’s going to be near impossible to keep that up.

      Kudos to Better Dwelling for not depending on the lazy and sloppy foreign buyers drove up the prices analysis. Even if 10% of foreign buyers bought a house, the other 90% of locals still had to support the marginal buyer.

  • Cindy 10 months ago

    Prices are basically flat while we print multi-year lows, which is actually very bullish in my opinion. Sales almost have to improve, like they’re seeing in Toronto. An improvement in sales almost always pushes prices higher, regardless of whether you perceive that to be good or bad news.

    • Rain City Ryan 10 months ago

      I’m curious, why must sales improve? If there is something fundamental that’s changed then I’ll agree, but I haven’t seen it yet.

      Toronto has seen a decline in prices leading to a dead-cat bounce as some folks think they’re getting a deal.

      • Cindy 10 months ago

        Sales improve because the benchmark to beat is so low. The perceived “rally” is what drives prices higher. It’s called sandbagging in the stockmarket. They push performance into a single quarter when it’s needed to stimulate growth.

        • Grizzly Gus 10 months ago

          This was the second worst September in the last decade, and we only beat last yeah by a very slight margin. Could turn out to be the worst once the numbers get revised in a month or two.

          Last year was all about the fair housing plan scare. No B-20, only one rate hike. Today we still have fair housing plan and we have had 4 hikes with another to come next week. Probably 3-4 more next year unless the economy breaks before than. This party is just getting started Cindy.

        • Rain City Ryan 10 months ago

          AAaaahhhhh I see now.

          This sounds a lot like the perceived rally at the end of last year when everyone jumped in before the B-20 came into effect.

          Interesting stuff. So happens in the wake of spending that gets pulled forward? I believe it’s a lull while everyone pays down the increased leverage they’ve assumed to buy now rather than later (assuming it doesn’t cause a correction).

          But don’t take my word for it, here’s a link to Ray Dailo’s new book (it’s a free PDF).
          Not trying to give anything away here but the title is “A Template For Understanding Big Debt Crises”

          https://www.principles.com/big-debt-crises/

  • Trevor 10 months ago

    Vancouver needs to fall more than 50% for it to get back to realistic levels. Realtors there should buckle up for a long ride down.

    • Richard Kemp 10 months ago

      No, it needs to fall 50% for Millennials that don’t want to get real jobs to afford a new home. You can’t buy a detached home as your first home, but you can buy a very nice condo on even a single income government salary in Vancouver.

      • vnm 10 months ago

        There are many routes to reconciliation, from market forces to legislated social engineering.
        Fortunately the clock is ticking on generational hoarding, as it it is on you and your despicable greed.

        • SUMSKILLZ 10 months ago

          “All those in favour of ‘envy taxes’, say aye!”….”those opposed, say no!”

  • Rick Abrams 10 months ago

    This looks like a good sign that the government is moving in advance of a crash. At the end of 2005 and the beginning the US had a last ditch chance to head off a huge crash, but the judges in the West District of LA Superior Court killed that attempt and the rest is history. We had done constant business with Countrywide during the 1980’s and it was a radically different company the 2000’s.

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