Canadian Housing Update 14: Prices Pause as Supply Continues to Grow
Supply hits all-time highs once again!
While prices remain positive in most areas, this has been a disappointing Spring Season for real estate. Active listings are at 10-year highs (and rising) and Homes Sold continue to decrease. The season's peak is usually May, when listings and homes sold usually peak. But we are seeing a rapid rise in listings into the summer, with total homes sold also decreasing. This should put further pressure on real estate pricing to the downside. This is common in the later summer months as buyers' focus begins to lessen. Rates have continued to slowly decline since November 2023 but have not decreased enough to bring in a flood of new buyers. The Canadian economy continues to be weak, which is giving cover for the Bank of Canada to slowly drop rates and not worry about the real estate market.
Key Numbers
Toronto Central Prices Down 1-2%
GTA Prices Flat to Up 1%
Toronto Suburb Prices Flat
Active GTA Listings Up 10%
Vancouver Central Prices Flat to Down 1%
GVA Prices Down 2-3%
Vancouver Suburb Prices Flat
Active GVA Listings Up 10%
Topics
Prices Stall as Supply Goes Up and Sales Go Down
Rates Decline But It Doesn’t Matter
Prices Stall as Supply Goes Up and Sales Go Down
Prices appear to have flat-lined as the heightened supply takes its toll. Even the hottest market in downtown Toronto has cooled which saw its first median price decline since December. GTA and GVA median prices did rise slightly but Active Listings and Day-on-the-market did also tick up.
Given these trends, the prices should come down in July and August. This is common for the season and the fundamentals (higher listings, lower home sales) appear to support this again this year.
This time of year is usually when listings begin to fall off. Therefore, it will be interesting to see how the next few months go because if listings remain elevated it may be signaling some desperation from the seller's side.
Rates Decline But It Doesn’t Matter
The rates have been trending slightly lower all year and we are starting to see new purchase mortgages in the 4.59% area. This is down from the 5.49% area last September/October. This decrease has made NEW purchases about 10% cheaper (in monthly mortgage payments) but this is still not enough to have buyers jump up and purchase.
The issue is the economy. Canada reported a new 6.2% unemployment rate, up from 6.1% the previous month, and a small growth of employment of only 26,700, in the same month. Also, a GDP growth rate MoM of 0% and an annualized growth rate of only 1.7%. We also saw a surprising increase in inflation last month after many down-trending months. While many people do not pay attention to these numbers, consumers are feeling the pain, and consumer confidence has been low on a historical basis. This indicator has averaged about 52.0 over the past 15 years.
Summary
Real estate prices usually decline in July and August from the more robust spring selling season as buyers enjoy the remainder of summer. This summer appears to be shaping up in the same way. There does appear to be much potential for an increase in prices over the coming months. Currently, the prices year-over-year are about flat from spring 2023 to spring 2024, therefore the decrease in rates does not appear to be helping the pricing. Given the weakening job market and low consumer confidence, we will need a change in trend to push prices higher.
Justin, Konrad, and Merriel
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Content Sources: Bloomberg, Trading Economics, Yahoo Finance, BCA Research
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