Housing Shrugs Off Another Hike...So Far
The housing market continued to recover even after the Bank of Canada came off the sidelines and resumed raising rates in June. Existing home sales rose 1.5% m/m, notching the fifth straight monthly increase with activity levels firmly in the pre-pandemic range. The national number masks some regional differences—notably, a 6.9% drop in GTA home sales was more than offset by gains in B.C. and Alberta.
Meantime, seasonally adjusted new listings rose for the third straight month, up almost 6% in June though still below pre-pandemic levels. The sales-to-new listings ratio dropped to 63.6%, but remains well above its long-term average around 55%, suggesting ongoing tightness. To that point: there were 3.1 months of inventory on the market, unchanged from May and about two months less than normal. It’s clear there remains little desire to sell given higher mortgage rates and a robust rental market.
And with that, prices continue to gain momentum, as they have since bottoming out soon after the Bank paused earlier in the year. Annual growth in average transaction prices accelerated to 6.7%, while the decline in the quality-adjusted MLS benchmark HPI eased to 4.5%. But, the index rose 2% on a monthly basis, marking its third straight increase in that range.
Bottom Line: Like clockwork, the housing market returned to life after the BoC paused in early 2023. Now, it seems that one rate hike was not enough to cool market psychology in June. Activity may take a breather in the coming months after (what we believe to be) the Bank’s final hike. Looking further ahead, the market will be well supported by favourable demographics. The Bank is expected to stay on hold for the rest of the year but will be watching closely to see to what degree the housing recovery will feed into broader inflation metrics.
Table 1 - Canada — Existing Home Sales
(% change)
|
June 2023 |
m/m1 Sales |
y/y Sales |
y-t-d Sales |
y/y Prices |
y-t-d Prices |
|---|---|---|---|---|---|
|
Canada |
1.5 |
4.7 |
-20.5 |
6.7 |
-6.8 |
|
Calgary |
7.1 |
8.7 |
-25.3 |
7.0 |
1.5 |
|
Regina |
-3.8 |
-12.7 |
-15.2 |
-0.9 |
-4.9 |
|
Montreal |
-2.1 |
-10.3 |
-23.0 |
-3.3 |
-5.3 |
|
Vancouver |
-0.5 |
21.1 |
-23.2 |
4.6 |
-2.6 |
|
Halifax |
9.8 |
-10.0 |
-23.2 |
7.2 |
-1.8 |
|
Winnipeg |
3.4 |
-12.0 |
-19.4 |
-3.7 |
-7.7 |
|
Edmonton |
3.0 |
-2.6 |
-25.9 |
-2.3 |
-5.6 |
|
Ottawa |
0.5 |
11.0 |
-19.2 |
-3.0 |
-9.4 |
|
Toronto |
-6.9 |
15.5 |
-18.2 |
3.1 |
-9.0 |
| MLS Home Price Index (national) | -4.5 | -11.5 | |||
| 1(seasonally adjusted) | |||||
Source: BMO Economics, Haver Analytics, CREA
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Shelly Kaushik
Economist, BMO
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The housing market continued to recover even after the Bank of Canada came off the sidelines and resumed raising rates in June. Existing home sales rose 1.5% m/m, notching the fifth straight monthly increase with activity levels firmly in the pre-pandemic range. The national number masks some regional differences—notably, a 6.9% drop in GTA home sales was more than offset by gains in B.C. and Alberta.
Meantime, seasonally adjusted new listings rose for the third straight month, up almost 6% in June though still below pre-pandemic levels. The sales-to-new listings ratio dropped to 63.6%, but remains well above its long-term average around 55%, suggesting ongoing tightness. To that point: there were 3.1 months of inventory on the market, unchanged from May and about two months less than normal. It’s clear there remains little desire to sell given higher mortgage rates and a robust rental market.
And with that, prices continue to gain momentum, as they have since bottoming out soon after the Bank paused earlier in the year. Annual growth in average transaction prices accelerated to 6.7%, while the decline in the quality-adjusted MLS benchmark HPI eased to 4.5%. But, the index rose 2% on a monthly basis, marking its third straight increase in that range.
Bottom Line: Like clockwork, the housing market returned to life after the BoC paused in early 2023. Now, it seems that one rate hike was not enough to cool market psychology in June. Activity may take a breather in the coming months after (what we believe to be) the Bank’s final hike. Looking further ahead, the market will be well supported by favourable demographics. The Bank is expected to stay on hold for the rest of the year but will be watching closely to see to what degree the housing recovery will feed into broader inflation metrics.
Table 1 - Canada — Existing Home Sales
(% change)
|
June 2023 |
m/m1 Sales |
y/y Sales |
y-t-d Sales |
y/y Prices |
y-t-d Prices |
|---|---|---|---|---|---|
|
Canada |
1.5 |
4.7 |
-20.5 |
6.7 |
-6.8 |
|
Calgary |
7.1 |
8.7 |
-25.3 |
7.0 |
1.5 |
|
Regina |
-3.8 |
-12.7 |
-15.2 |
-0.9 |
-4.9 |
|
Montreal |
-2.1 |
-10.3 |
-23.0 |
-3.3 |
-5.3 |
|
Vancouver |
-0.5 |
21.1 |
-23.2 |
4.6 |
-2.6 |
|
Halifax |
9.8 |
-10.0 |
-23.2 |
7.2 |
-1.8 |
|
Winnipeg |
3.4 |
-12.0 |
-19.4 |
-3.7 |
-7.7 |
|
Edmonton |
3.0 |
-2.6 |
-25.9 |
-2.3 |
-5.6 |
|
Ottawa |
0.5 |
11.0 |
-19.2 |
-3.0 |
-9.4 |
|
Toronto |
-6.9 |
15.5 |
-18.2 |
3.1 |
-9.0 |
| MLS Home Price Index (national) | -4.5 | -11.5 | |||
| 1(seasonally adjusted) | |||||
Source: BMO Economics, Haver Analytics, CREA
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