Inventory Clearance Sale
Canada’s housing market remained very balanced overall in August, with significant regional and segment variation persisting. At the national level, sales have steadily climbed back toward longer-term norms, inventory is elevated but not overly saturating the market, and prices are effectively flat. In markets where price corrections are ongoing, ample inventory is starting to pull buyers off the sidelines. A few more Bank of Canada rate cuts that take mortgage rates down into the mid-3% range could speed up the process and begin to finally tighten some of these markets.
Meantime, a wave of mortgage renewals is coming in the next six-to-twelve months. There are roughly 1.8 million Canadian mortgages set to renew over the next year, most of which are coming off the low-rate era borrowing costs of three-to-five years ago. To be sure, this is a significant volume, but we continue to believe that households, the economy and the financial system are well equipped to handle it. Read more here: The Mortgage Renewal Wave: Sink or Swim?
Existing home sales rose 1.1% in seasonally-adjusted terms in August, the fifth straight month of gains. Sales were up a modest 1.9% from year-ago levels, and are effectively back into the range, albeit the lower end, of what was ‘normal’ before the pandemic.
New listings rose a stronger 2.6% in the month, and were up 6.1% from a year ago. There's plenty of inventory out there, and the sales-to-new listings ratio dipped slightly to 51.2% in August, still reflecting balanced overall conditions. The months' supply of homes for sale was stable at a very manageable 4.4 worth. That's been helped by lower prices helping to clear the market. And, one wonders if a sizable chunk of 'new listings' activity reflects relistings at lower prices.
With balanced conditions, the national benchmark price was down just 0.1% in August on a seasonally-adjusted basis, which left prices still 3.4% below year-ago levels. The national benchmark still sits more than 17% below peak early-2022 levels, and the sideways movement continues.
Here’s a quick rundown of local market conditions:
Southern Ontario remains the weak spot, with a glut of condos under construction, hitting the resale market and pressuring prices. The wave of investor-owned supply is also spilling onto the rental market, pulling down rents and keeping new investors away. Apartment prices are down anywhere from 6% to 15% from a year ago across markets like Toronto, London and Barrie. Single-detached prices across these markets are holding up better, but are also still falling as affordability has more improving to do.
Vancouver and some other markets across B.C. remain soft alongside elevated inventories, but they’ve become less-so in recent months. Vancouver back in balanced market territory with the sales-to-new listings ratio at 42%, but both condo and detached prices are down 4% to 5% from a year ago.
Markets in Quebec and further east remain tight almost across the board. Price gains in those regions are firm, led by a 14% y/y jump in Quebec City, 7% y/y in Montreal and 10.0% y/y in Fredericton. On a relative affordability scale, these are markets that were historically very cheap, and are therefore struggling much less under the weight of current mortgage rates.
Calgary continues to soften, with a lot of the affordability/investor arbitrage (i.e., from Toronto to Calgary) now priced out. Sales are down 11% from a year ago, and the market is now balanced if not soft. The benchmark HPI is actually now down 2% from a year ago. Interestingly, the cheaper Edmonton market remains very firm.