Canada’s housing market remained under pressure in March, with sales and prices both weakening further. While winter weather has been tough in many regions, there is some clear underlying weakness as inventory builds, investors remain absent and other potential buyers are losing confidence in the face of the trade war. Suffice it to say that motivation on the buy side is still very low—and almost nonexistent in a few regions.
Existing home sales fell 4.8% in seasonally-adjusted terms in March, marking four consecutive months of downward momentum. That leaves sales down 9.3% from a year ago and, in raw terms, it was the weakest March for activity since the pit of the 2009 recession. While the Bank of Canada has been cutting rates, it hasn't been enough to seriously improve the affordability calculus, especially with 5-year fixed rates still holding just above 4%.
New listings rose 3.0% in the month, and were up 13.1% from a year ago. That combination weakened the market balance in March. The national sales-to-new listings ratio fell to 45.9%, the lowest level since 2009 (and the mid-1990s before that). The months' supply of homes for sale is also 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 clearly toward softening conditions.
Challenging conditions pulled down prices in March, and the weakness is accelerating. The MLS benchmark price fell a seasonally-adjusted 1.0% (-11.9% a.r.), a second consecutive monthly decline, which pulled the year-on-year growth rate down to -2.1%.
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 marking one of the weakest spots in Canadian real estate, with prices down 4.5% y/y. Single-detached prices in Toronto are also below year-ago levels after falling in March. Condo markets across the smaller Southern Ontario cities (see Barrie, Niagara and London) are performing even worse.
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.
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 sellers’ markets and continue to outperform national averages for market balance and price growth. Prices in these markets have all returned to record highs relative to the recent correction and, unlike markets like Toronto and Vancouver, new listings are very stable. Calgary has begun to soften in recent months, and that continued in March, but that market remains balanced.
All told, lower mortgage rates have yet to spur market activity, and confidence has clearly been impacted by the trade war. One could even call much of Southern Ontario and parts of B.C. bear markets for housing, even as other areas of Canada hold relatively firm.
In a separate release, Canadian housing starts fell to 214k annualized units in March, with activity steadily fading since November. The six-month average now sits at 235k annualized; the 12-month average is 240k and the annual high set in 2021 was above 270k. This comes as population growth is slowing sharply and the current pipeline of completions is meeting tough resale market conditions, especially in Ontario and B.C. (and it's still early days on those fronts). Notably, starts in Ontario crumbled to 39k annualized in March, just about matching levels last seen during the depths of the 2009 recession. While starts can be a bit of a weather report, this is more evidence that tough conditions in the province are here to stay.