Canadian real estate prices are still rising, but showing some signs of moderation. That was RBC senior economist Robert Hogue’s take on April home sales. While he sees big price growth to continue near-term, he’s also seeing a fast-changing market. Many of the factors that heated up the market, are beginning to ease just as quickly as they ramped up.
Home Resales Dropped For The First Time In Five Months
Canadian home sales fell for the first time in almost half a year, going into the busy Spring period. There were 731,600 seasonally adjusted and annualized home sales in April, down 12.5% from a month before. Southern Ontario was home to the lion’s share of declines, but the bank said the trend was fairly widespread.
Activity Pulling Back From “Unsustainably” High Levels
The market is cooling from unsustainably high levels, according to the bank. “It wasn’t a surprise to see Canadian home resales decline 12.5% in April. After successively setting new record highs through the fall and initial months of 2021, they had little upside left,” said Hogue.
The economist believes the strong activity in the winter pulled demand forward. Now the market is dealing with that gap of buyers, and factors likely to delay homebuyers. “Unusually strong winter activity likely altered the traditional seasonal pattern, bringing forward activity that would have taken place in the spring,” he said.
Though he did note not every market was affected by the sudden drop in sales. More affordable markets like Atlantic Canada, the Prairies, and Quebec were still strong. Most of the falling activity is in Southern Ontario and BC. The last two regions tend to lead the market though.
Market Imbalances To Ease To Ease Pressure… Eventually
Home prices are still climbing very fast, but many factors are likely to cool growth. Home sales are falling faster than inventory is a big one, but there’s a few of others. Rising financing costs, affordability squeeze, down payments, etc… Basically, the factors that accelerated price growth are reversing and will slow it. Instead of pulling demand forward, it will push it outwards.
“There is plenty of room for activity to ease further in the months ahead—and yet remain historically vibrant. We expect a gradual rise in longer-term interest rates, deteriorating affordability, mortgage stress test tightening and the resumption of office work to cool demand down a few degrees,” he said.
Adding, “In the meantime, though, prices are likely to keep rising rapidly.”
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