Spring Has Left the Air
Canada’s housing market remains very subdued, but with increasing regional variation—location really does matter again. At a high level, weak consumer confidence continues to weigh on sales activity, while borrowing costs are still not low enough to improve affordability and/or rekindle investor demand. In this environment, we continue to see stagnant sales and gradually fading prices at the national level.
Existing home sales were effectively flat in seasonally-adjusted terms in April, after four consecutive months of decline. That leaves sales down 9.8% from a year ago. Given that the lowest-available mortgage rates are still bouncing around the 4% level, and the Bank of Canada has taken a wait-and-see approach given two-sided (growth and inflation) risk surrounding the trade war, any expected relief from lower borrowing costs has stalled. That, along with buyer uncertainty, has really dampened the spring market. We'll see if better weather and a better tone in financial markets bring activity back to life in May and June.
New listings dipped 1.0% in the month (+1.2% y/y), leaving little change in the overall market balance. The national sales-to-new listings ratio inched up to 46.8%, which is still bouncing around the softest levels since 2009 (and the mid-1990s before that).
The months' supply of homes for sale is also still climbing, hitting 5.1 in the month (a non-pandemic level last seen in 2019). That's not a major overhang of inventory at the national level, but the direction is still toward softening conditions.
Prices continued to fall at the national level in April, and the weakness is accelerating. The MLS benchmark price fell a seasonally-adjusted 1.2% (-13.7% a.r.), which pulled the year-on-year rate down to -3.6%. That now marks declines in 8 of the past 10 months, with the April drop the largest since November 2023.
The weakness is mostly an Ontario story, where buyers' markets are evident across a number of cities. In Toronto, the glut of condos hitting the resale market is arguably the weakest spot in Canadian real estate, with prices down 6.9% y/y—some smaller condo markets in the region, like Niagara and Barrie, are performing worse. Single-detached prices in Toronto are also 5.2% below year-ago levels after falling again in April.
Vancouver and some other markets across B.C. also continue to soften, as a significant flow of new listings hit the market across the province early in the year. Vancouver has returned to buyers' market conditions, with condo prices down more than 2% y/y.
On the flip side, markets in Quebec and further east are tight almost across the board as steadily rising sales outpace increases in new listings.
Edmonton, Regina and Winnipeg also all see tight markets outperforming national averages for market balance and price growth. Calgary, however, has softened in recent months, and that continued in April with conditions much more balanced and the benchmark price slipping again.
In a separate release, Canadian housing starts rose to 278k annualized units in April, which is the strongest level in almost two years. Granted, that follows a period of more subdued activity through the depths of winter, but the overall level of residential construction remains very firm. The 12-month average sits at 243k, while the 6-month average is similarly running at 241k. The level of resilience is impressive given that starts for homeownership and condos have crumbled in some markets (e.g., Southern Ontario) given weak market conditions. But, purpose-built rental activity has filled the gap. Note that over the past 12 months, purpose-built permits have topped those for condos for the first time since the early-1990s. Of course, this full pipeline comes just as population growth has slowed and rents are already ebbing in many cities.