June home sales softened but remain resilient as Bank of Canada rate hikes resume

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The Bank of Canada’s June rate hike served as a splash of cool water to recent housing market strength as home sales moderated in June and priced edged down compared to May.

However, with June sales still up 1.5% from May, BMO economist Shelly Kaushik notes “it seems that one rate hike was not enough to cool market psychology.”

The Canadian Real Estate Association’s (CREA) latest monthly data showed a total of 40,449 sales in June, up 4.7% compared to a year ago and nearing its 10-year average of just over 43,000 sales. This marks a moderation in sales compared to the double-digit swings experienced over the past several years.

“With sales levelling off near historically average levels and new listings finally starting to play catch up, housing markets appear to be settling down,” said Shaun Cathcart, CREA’s senior economist.

Courtesy: CREA

The number of newly listed homes continued to increase for the third straight month, rising 5.9% from May. CREA noted that with new listings outperforming sales in June, the sales-to-new listings ratio eased to 63.6%, down from a recent peak of 68.3% in April.

Despite the slowdown in sales growth, TD economist Marc Ercolao wrote that there remain “pockets of strength” in several markets, including Nova Scotia, where sales were up 7.5% month-over-month, Manitoba (+4.8%) and Alberta (+4.7%).

“This points to some degree of resilience on the part of housing demand to the Bank of Canada’s rate hike last month, which was likely disconcerting for policymakers,” he noted.

Average sale prices eased in June

The average national sale price (not seasonally adjusted) fell 2.7% compared to May, but remains 6.7% above year-ago levels. In seasonally adjusted terms, a composite of the MLS Home Price Index rose 2% month-over-month to $749,100, but remains down 4.5% compared to June 2022.

“History suggests the price side of things will respond to this with only a slight lag,” Cathcart added. “Add to that the recent Bank of Canada rate hikes, and we can probably expect price growth to moderate in the months ahead, likely still with some degree of upward pressure, but less than in the last three months.”

Cross-country roundup of home prices

Here’s a look at select provincial and municipal average house prices as of June.

Location Average Price Annual price change
B.C. $989,523 +4.5%
Ontario $910,102 +3.1%
Quebec $489,202 -1.3%
Alberta $464,139 +3.9%
Manitoba $362,327 -3.7%
New Brunswick $286,500 -3.7%
Greater Vancouver $1,203,000 -2.4%
Greater Toronto $1,171,300 -1.9%
Victoria $885,100 -7.4%
Barrie & District $824,300 -8.5%
Ottawa $652,700 -5.7%
Calgary $548,300 +4.3%
Greater Montreal $516,400 -4.6%
Halifax-Dartmouth $528,400 +1.9%
Saskatoon $381,400 +0.5%
Edmonton $376,800 -7.2%
Winnipeg $348,100 -3.5%
St. John’s $330,500 +2.8%

*Some of the movements in the table above may be somewhat misleading since average prices simply take the total dollar value of sales in a month and divide it by the total number of units sold. The MLS Home Price Index, on the other hand, accounts for differences in house type and size and adjusts for seasonality.

Where does the housing market go from here?

CREA also unveiled its updated quarterly forecast today, with upward revisions to average prices in both 2023 and 2024 and downward revisions to the total number of sales expected in 2023 and 2024.

Explaining its downward revision to sales, CREA noted that the Bank of Canada’s unexpected end to its pause, with hikes in June and July, mean “a major source of uncertainty has returned to the housing market.”

“That said, even before the resumption of rate hikes, the recent sales rally had already shown signs of losing steam,” the forecast continues. And despite new listings catching back up to sales, CREA says this likely won’t translate into continued big gains in activity as it expects buyers to move back to the sidelines barring further direction from the Bank of Canada on its policy intentions.

“Looking further out, there’s also a growing consensus that rates will not just be higher, but likely for longer—well into 2024,” the report adds.

Here’s a look at CREA’s latest quarterly forecasts for the Canadian housing market:

National average home price:

  • 2023 updated forecast: $702,409 (-0.2% YoY)
    • Prior forecast: $670,389 (-4.8%)
  • 2024 updated forecast: $723,250 (+3%)
    • Prior forecast: $702,200 (+4.7%)

National home sales:

  • 2023 updated forecast: 464,239 sales (-6.8% YoY)
    • Prior forecast: 492,674 (-1.1%)
  • 2024 updated forecast: 516,072 sales (+11.2%)
    • Prior forecast: 561,090 (+13.9%)

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