Canadian home sales fell for the fifth month in a row, and prices continue to fall as rising interest rates keep prospects on the sidelines.
The Canadian Real Estate Association (CREA) said on Monday that home sales across the country were down 29.3% from last year. Sales fell 5.3% from June, marking the fifth straight month of decline, but July’s decline was the smallest of the past five declines. CREA said sales declined in about three-quarters of all local markets, led by Greater Toronto Area (GTA), Greater Vancouver, Fraser Valley, Calgary and Edmonton.
Home prices have also continued to fall, with the average home price dropping 5% from July last year to $629,971. Excluding sales in GTA and Greater Vancouver, his two most active and expensive housing markets in the country, cuts him $104,000 from the national average price. The MLS Home Price Index (HPI), which CREA says is a more accurate price comparison than the median or average price, fell 1.7% on a month-to-month basis, with the benchmark price dropping to $789,600.
“July saw a continuation of the trends we have seen in the last few months, with lower sales and higher prices in the more expensive regions of the country and where prices have risen the most in the past two years. Prices have fallen.” CREA Chairman Jill Oudill said in a statement:
“That said, demand, which was very strong just a few months ago, has not gone away, but some buyers may be on the sidelines until they see what the cost of borrowing and prices will be. When it re-enters the market, they will find a little more choice, but not as much as one might hope.”
Average home prices fell in July, but CREA data shows that every province, except Ontario, actually sees prices rise each year. CREA said rising interest rates “disproportionately constrain sales in more expensive markets and market segments” and changes in sales mix “could cause national average prices to overstate the downward pressure on actual prices.” points out.
The cooling in the Canadian housing market was due to the Bank of Canada aggressively raising its benchmark interest rate in response to a spike in inflation. The central bank’s key rate is now at 2.5%, the highest since 2008. The bank raised its benchmark interest rate by 100 basis points in July.
Marc Desormeaux, chief economist at Desjardins, said in a research note on Monday that he expects average home sales prices in Canada to continue to decline by nearly 25% from a peak in early 2022 to the end of next year.
“Although the pace of sales and price declines eased in July, the trend remains negative,” he wrote.
“July’s figures show the severity of the ongoing correction and the historic level of Canadian economy sensitivity to housing.”
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. follow her on her twitter @alicjawithaj.