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The Canadian Housing Market Slows Down: Average Selling Price Drops 13% Since February

CEO Khai Intela
Canada's housing market has seen a significant slowdown in recent months, with the average selling price of a Canadian home dropping by over $100,000 since February. This decline marks a 13% decrease in just three...

Canada's housing market has seen a significant slowdown in recent months, with the average selling price of a Canadian home dropping by over $100,000 since February. This decline marks a 13% decrease in just three months, reflecting a cooling trend in the market. While May is typically a strong month for home sales, the Canadian Real Estate Association (CREA) reported a 20% decrease in the volume of homes sold compared to the previous year.

After a strong rebound following the initial impact of the COVID-19 pandemic, Canada's housing market is now experiencing a noticeable shift. The decline in momentum can be attributed to rising lending rates, making mortgages more expensive and reducing buyers' purchasing power. Shaun Cathcart, CREA's chief economist, stated that this slowdown was expected, as the market begins to normalize in terms of sales activity and prices.

However, it's important to note that the average price figure provided by CREA can be misleading due to the influence of sales in expensive markets like Toronto and Vancouver. To provide a more accurate representation of the market, CREA also calculates the House Price Index (HPI), which adjusts for housing volume and types. The HPI reflects a 0.8% decrease in the past month, following a 1.1% decrease in April. Despite these declines, the HPI remains 19% higher than the previous year.

The impact of the slowdown varies across the country, with Ontario and British Columbia experiencing significant price declines. Rishi Sondhi, an economist with TD Bank, highlights the regional disparities within the national market. He notes that affordability deterioration during the pandemic has led to greater sales and price reductions in these areas. The Greater Toronto Area, in particular, saw a significant rise in prices, fueled by investor activity. However, Sondhi predicts that this trend will run its course in the near future.

The suburbs have been hit hardest by the market slowdown in Toronto. During the pandemic, buyers sought more space, resulting in a surge in prices. Now, the market is returning to a more balanced state. Cailey Heaps, president and CEO of Toronto-based real estate firm Heaps Estrin, emphasizes that any change in the market may feel significant due to the abnormal performance in recent years. However, she expects the market to remain strong due to limited supply and continued demand from immigrants.

In British Columbia, the market is also cooling down after experiencing substantial gains earlier in the pandemic. This shift may present opportunities for prospective buyers who were previously priced out of the market. Wesley Favro, a former condo owner in Kelowna, B.C., sold his property in 2020, hoping to upgrade. However, prices escalated beyond their budget, leaving them renting and waiting for a chance to buy. Favro expresses the desire to put down roots in the community they love, hoping that the market will slow down enough to make this possible.

Wesley Favro owned a condo in Kelowna, B.C., up until 2020, when he and his partner sold it, hoping to move up to something bigger. But prices quickly escalated beyond their budget, so they're now renting and waiting for an opportunity to buy. Wesley Favro owned a condo in Kelowna, B.C., up until 2020, when he and his partner sold it, hoping to move up to something bigger. But prices quickly escalated beyond their budget, so they're now renting and waiting for an opportunity to buy.

In conclusion, the Canadian housing market is currently experiencing a slowdown, with the average selling price of homes declining by 13% since February. Factors such as rising lending rates and regional disparities contribute to this market shift. However, experts anticipate a more balanced market in the future, while also highlighting the impact of limited supply and ongoing demand. Prospective buyers may find opportunities as prices stabilize, allowing them to make their mark in the housing market.

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