Canada’s housing market is “moderating” – but not cooling down

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Sales and prices have risen sharply year-on-year, but one retail group is taking a positive turn

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When the new mortgage stress test went into effect on June 1st and weighed on the purchasing power of the average Canadian home, you have likely seen numerous media mentions of a possible slowdown in the overheated Canadian real estate market.

Well, it turns out that “cooling off” when it comes to Canadian real estate is kind of like throwing your Brita on an active volcano.

The Canadian Real Estate Association announced that May home sales were 103.6 percent higher than a year earlier. The national average sales price for the month increased 38.4 percent over the same one year period.

Nevertheless, CREA’s headline read: “The housing market will continue to weaken in May.” This is what a “modern” Canadian housing market looks like.

The national picture

Canada map with red house

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To be fair to CREA, total home sales across Canada declined 7.4 percent from April to May, so the pace of sales has steadily declined since March when a record 76,259 homes changed hands.

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However, a decline in sales does not necessarily mean a decline in demand. In a busy market, fewer sales often mean that buyers simply cannot afford the homes on offer, or that the number of homes in the market is rapidly decreasing and sales growth is becoming impossible. New registrations in Canada fell 6.4 percent last month, according to CREA.

One of the most important metrics for measuring the temperature of a market is the ratio of sales to new offers. The higher that is, the faster real estate will be snatched by buyers.

In May the rate was 75.4 percent, a little lower than in April, but a massive improvement from the 90.7 percent in January. For Canada to penetrate the buyer’s market, the ratio of sales to new offers would have to be closer to 40 percent.

Don’t expect this to happen so quickly. CREA said in its press release Tuesday that three-quarters of local markets had a sales-to-new-entry ratio “above long-term norms, in many cases well above”.

The nationwide median retail price in May was just over $ 688,000. While that was almost $ 30,000 less than the record set in March, it was about 40 percent compared to May 2020.

Ontario home sales

Hamilton, Ontario

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Hamilton, Ontario

How much “cooler” did it get in Canada’s craziest housing market last month? Let’s put it this way: Ontario broke its previous sales record for May.

Home sales in the province more than doubled compared to May 2020 and were 24 percent above the five-year average. Year to date, home sales in Ontario are up 91.9 percent from the first five months of 2020.

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The average retail price of now $ 866,307 is 37.6 percent higher than a year ago.

While Ontario new listings saw a healthy 77 percent year-over-year increase in May, active listings fell nearly 21 percent by the end of the month. According to CREA, active listings “weren’t this low in May in more than three decades”.

If inventory continues to decline, you can bet that property values ​​will continue to go in the opposite direction.

British Columbia home sales

Richmond, BC

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Homes in Richmond, BC

Revenue in British Columbia rose a staggering 178.2 percent year-over-year, according to the British Columbia Real Estate Association, which does not share its monthly data summary with CREA. Rising demand drove the average home price up 26.2 percent from $ 726,335 in May 2020 to $ 916,340 last month.

The supply in BC is increasing, but especially in the Lower Mainland. New listings outside of Metro Vancouver “have flattened out,” says BCREA chief economist Brendon Ogmundson.

The new listings in Vancouver may have helped limit price growth in the city over the past month. The average price in Vancouver rose year-on-year by “only” 13.3 percent – and reached just under 1.2 million US dollars.

Eight other local BC property managers reported average price growth of more than 24 percent.

Where home prices are growing the slowest

St. John's, Newfoundland and Labrador

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St. John’s, Newfoundland and Labrador

You can’t distort your view of the market too much, as the high prices and more frequent sales in Ontario and British Columbia will inevitably drive them up. But not every market in Canada appreciates by 38.4 percent annually.

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While there aren’t many of these, prices rose well below the national average in some solid markets in May:

  • St. John’s, Newfoundland and Labrador: 5.6 percent
  • Regina, Saskatchewan: 8.1 percent
  • Calgary: 11 percent
  • Saskatoon, Saskatchewan: 13.1 percent
  • Edmonton: 13.4 percent
  • Vancouver Island, BC – 18.7 percent
  • Kamloops, BC: 24 percent
  • Saint John, New Brunswick: 26.3 percent
  • Fredericton, New Brunswick: 26.5 percent
  • Chilliwack, BC: 26.9 percent

The lesson, homebuyers, is to look further. Not every community’s house prices are under the same pressure as Toronto’s.

Talk to a mortgage broker and find out what you can afford. With mortgage rates this low, you might be surprised at how much home you can buy.

Once you have a maximum price to work with, start researching communities where you are comfortable owning a home. Don’t let the two steps be reversed. If you look at markets before you have set your budget, you can disappoint yourself.

And even if you’re not preparing for an upcoming bid war, think about the impact making sound financial decisions can have on your ability to qualify for a mortgage.

Maintain healthy credit, maximize your savings, and increase your income. Even Canada’s supposedly “cooling” market will burn your dreams away. Since there is no solution in sight to the real estate crisis in the country, you can only realize your dream home with more money.

This article was created by Wise Publishing, Inc. and provides clear, trustworthy information that people can use to take control of their finances. Millions of readers across North America rely on the Toronto-based company to help them save money, find the best bank accounts, get the best mortgage rates, and handle many other financial matters.

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