Striking a Balance Canada's housing market is showing further signs of stabilizing, and conditions appear to be balancing across the country. Volumes and prices have likely bottomed in the hardest-hit markets, but the recovery is going to be flat with little in the pipeline to trigger a forceful rebound. Even so, going from a deep correction to a flat and stable resale market is incremental progress, and likely removes what was a persistent drag from Canadian economic growth.
Existing home sales were down 5.3% y/y in July but they rose 0.5% from the prior month, in seasonally adjusted terms. That's three consecutive month-to month gains in volumes, albeit modest ones, and activity remains stable around the low end of pre-COVID norms. This reflects a very subdued, but still functioning, market. New listings were down 1.6% in the month, or 6.9% from a year ago, which is helping keep the market in balance overall.
That leaves the market balance almost bang on neutral, with the national sales-to-new listings ratio improving slightly to 51.3% from 50.2% in the prior month, while the months' supply of homes on the market fell another tick to 4.7—right around the long-run average.
The national benchmark price was down 3.2% from a year ago, but declines have leveled off. On a month-to-month basis, the benchmark price was up 0.1% in seasonally-adjusted terms, while the 3-month annualized pace is now flat versus a near minus-7% rate earlier in the year. This is all indicative of a market that is working to turn over the homes that need turning over, and not much more—speculation is gone, investors are absent, and prices are just holding flat alongside low and stable volumes.
The regional variation in market conditions remains, but some of the hot spots are cooling, while the weak spots get less bad. Sales were down across most markets from a year ago in July.
Vancouver sales were down 9.6% y/y, but the sales-to-new listings ratio has crept back to the low end of balanced territory. Prices are still fading on a month-to-month basis and this remains one of the weaker markets in Canada.
Southern Ontario is still struggling as well, with most markets outside the GTA barely balanced. This is a clear improvement from recent trends and could ultimately stabilize prices, but let's not forget how stretched activity and valuations got in these regions—it will take more time. Toronto sales were down a modest 0.9% y/y, and some pockets appear to be firming—namely larger ground-oriented units.
Alberta markets have pivoted from strength to softness. Sales-to-new listings ratios have slipped below 60% in Calgary and Edmonton, which is still balanced territory, but well down from recent readings.
Atlantic Canada markets are still tight overall, across most cities, and price gains have leveled off. Montreal and Quebec are still firm.
In a separate release, Canadian housing stats fell for a third consecutive month to 229k annualized units. That leaves the year-to-date average running at a solid 246k, and the latest 12 months averaging 251k. Homes under construction for ownership and condo purposes are now down a recession-like 25k from a year ago, but purpose build rental activity is masking the decline, up almost 30k. On the ownership side, the decline in activity is the market doing what the market should be doing—that is, rebalancing itself.