Real Estate is Local
Canada’s housing market is looking very balanced and stable through the summer, with significant regional 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, we seem to be getting closer to levels that are bringing some buyers off the sidelines, helping the market clear better.
We’ve seen three major factors holding back the housing market, some of which are improving: Economic and job-market conditions have been sluggish, with added uncertainty from the trade war. The latter is ongoing, but less pronounced than in the spring, especially with equities pushing record highs by the week. The Bank of Canada is on hold, and mortgage rates around 4% are not low enough to improve the affordability calculus in a demand-sparking way. And, market psychology is a hurdle. Just as expectations of higher prices drove accelerating gains on the way up, the understanding that prices are falling is holding back buyers on the way down in some locations. Unless the economy really rolls over, we continue to see relatively balanced aggregate conditions ahead.
Existing home sales rose 3.8% in seasonally-adjusted terms in July, a fourth consecutive month of improvement. Sales were also up a moderate 6.6% from year-ago levels, and are effectively back into the range, albeit the lower end, of what was ‘normal’ before the pandemic.
New listings were little changed in the month, but are still up 5.9% from a year ago. In general, there is healthy listings flow but very little forced selling, which has kept this correction orderly and contained. Indeed, the market balance improved again in July, with the national sales-to-new listings ratio rising to 52%, almost smack in the middle of balanced territory.
With balanced conditions, the national benchmark price was flat in July on a seasonally-adjusted basis, which left prices still down 3.4% from a year ago. The national benchmark still sits more than 17% below peak early-2022 levels, and the sideways grind continues.
The national figures truly mask stark differences across the country and across segments. Here’s the quick rundown:
Southern Ontario remains the weak spot, with a glut of condos under construction, hitting the resale market and pressuring prices down. 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 in the 6%-to-9% range from a year ago across markets like Toronto, Kitchener-Waterloo and Barrie, and new presale activity is bone dry. Single-detached prices across these markets are holding up better, but are also still falling.
Vancouver and some other markets across B.C. remain soft alongside elevated inventories, but they’ve become less-so in recent months. Vancouver has edged back into balanced market terrain with the sales-to-new listings ratio at 40%, but both condo and detached prices are down roughly 3% from a year ago.
Markets in Quebec and further east remain very tight almost across the board. Price gains in those regions are firm, led by an 18% y/y pop in Quebec City, 8.4% y/y in Montreal and 9.0% y/y in Fredericton. On a relative affordability scale, these are markets that were historically very cheap, and are therefore struggling much less (i.e., not at all) under the weight of current mortgage rates.
Calgary continues to soften, with most of the steam now let out of what was Canada’s strongest market. Sales are down 10% from a year ago, and the tight sellers’ market of the past two years is now very balanced. The benchmark HPI is actually now down slightly from a year ago. Perhaps investors have backed off; perhaps the affordability arbitrage has run its course—the cheaper Edmonton market remains very firm.