The Canadian housing market continues to cool with falling home sales and declining prices. Source: Image Source
The Canadian Real Estate Association (CREA) has reported a continued decline in Canada's housing market in September. With home sales falling for three consecutive months and benchmark prices slipping lower, the market is showing signs of a slowdown. CREA represents over 100,000 realtors across Canada and provides monthly statistics based on sales on its Multiple Listings Service.
Slowing Sales Trend Continues
The trend of slowing sales in the Canadian housing market, which started with a rapid escalation in interest rates, continued in September. Sales volume has been inching lower every month since June, reinforcing the slowdown. The national price index, provided by CREA, experienced a decline of 0.3 percent during the month, the first decline since March. This was mainly due to a sharp slowdown in Ontario, while prices in most other provinces are still showing slow growth.
A decline in home sales indicates a trend of slowing housing market in Canada. Source: Image Source
According to CREA president Larry Cerqua, buyers are currently content to wait it out on the sidelines until there is more evidence that interest rates have reached their peak. Additionally, many sellers do not have an urgent need to sell, which further contributes to the market's slower pace. This combination of factors suggests that the housing market is likely to remain subdued until next year.
Interest Rates and Market Volatility
Benjamin Reitzes, an economist with Bank of Montreal, agrees with the assessment that the Canadian housing market is in for a bumpy ride as long as interest rates remain at their current level. Reitzes states that the current level of interest rates and prices do not mix well, and either interest rates or prices need to adjust. However, it seems unlikely that the Bank of Canada will cut rates anytime soon. Reitzes also points out that different provinces may experience varying levels of struggle in the housing market.
Breaking Down the Average Price
The average selling price of a home in Canada last month was $655,507, representing a 2.5 percent increase compared to the previous year. However, CREA emphasizes that the average figure can be misleading due to the influence of the expensive markets of Toronto and Vancouver. Vassil Staykov, a Toronto realtor, explains that a shift in the sales mix is the reason the average selling price is not significantly lower.
Sellers are holding out for high prices while buyers are looking for bargains, causing a gap between buyers and sellers in the housing market. Source: Image Source
The Gap Between Buyers and Sellers
According to Staykov, the main theme of the housing market is the significant gap between sellers who are unwilling to accept lower prices and buyers searching for bargains. He notes that after several years of skewed data and inflated prices, the reality is that many properties are not selling. Buyer fatigue is setting in, not due to losing in multiple bidding wars, but because sellers are refusing to acknowledge the cooled market. Both buyers and sellers are sticking to their positions, leading to low-ball offers and limited transactions.
Price Adjustments and Repossessed Homes
One notable trend in the current housing market is the increasing number of listings with price changes. This indicates that sellers are not receiving offers at their asking prices and are making adjustments to attract buyers. In the Greater Toronto Area alone, there were 823 listings with price changes in September, and by October, that number had already reached 880. This demonstrates ongoing price discovery within the market.
Furthermore, there is an uptick in the number of repossessed homes, where the seller is a lender who has taken possession due to the owner defaulting on the loan. Staykov mentions that he has observed about 70 such sales in Toronto, double the number from the previous year. These repossessed homes are likely to continue increasing, particularly those associated with private mortgages that carry higher risks.
The number of repossessed homes is increasing in the Canadian housing market. Source: Image Source
The Canadian housing market is facing challenges as sales continue to decline, and benchmark prices experience a downward trend. Buyers and sellers are at odds, with sellers reluctant to lower prices and buyers seeking more affordable options. The market's performance will heavily depend on the future direction of interest rates and the resilience of different provinces. As the market evolves, it is crucial for buyers, sellers, and industry experts to monitor these developments closely.
