August 16, 2021 | 10:07
Canadian Existing Home Sales (July) — Sales Be Coming Down the Mountain
Canadian existing home sales fell 3.5% in seasonally-adjusted terms in July, the fourth consecutive month of declining activity after peaking at astronomical levels in March. And, considering that sales had fully rebounded from the pandemic low by this point last year (and then some), sales are now down from prior-year levels (-15.2%) for the first time since May 2020. That said, we’ll reiterate that this is not at all a quiet market, with sales still roughly 10% above pre-COVID levels, and about 15% above the 10-year average. If not for the spring inferno, the headlines would be about record activity today.
Meantime, new listings were down 8.8% in July, which actually tightened the market despite the pullback in sales. The national sales-to-new listings ratio jumped to 74% (seasonally adjusted) in the month, and the months’ supply of homes for sale steadied at a still-paltry 2.3 worth.
Against that backdrop, prices continue to rise even if the growth has peaked (which it has). The MLS HPI was up 22.2% y/y in July, just down from the prior month, which was the fastest pace since at least 2000. Shorter-term changes are ebbing, with growth over the past 3-months at 11.2% annualized; and growth over the past month running at 7.1% annualized. The current market balance suggests that the latter pace will roughly hold, but we’ll see how listings and sales evolve through the late-summer and fall periods.
Strength remains broad across the country, but some variability is starting to show up again. Across the 26 major markets tracked by CREA, 18 saw sales decline in July. On a market-balance basis, Montreal remains extremely tight, although price growth slowed to ‘just’ 23.4% y/y. Vancouver is firm as well, with new listings down sharply in the month. Toronto remains strong, with the market tightening in July and prices for both single-detached condos still rising solidly month-over-month. The Prairies, however, have softened somewhat in recent months, while cottage country prices (especially Ontario) appear to have peaked.
The Bottom Line: Home sales continue to back off from extreme levels seen earlier in the year, but current activity is still historically strong and driving solid price growth in most markets. From a bigger-picture perspective, we might close to the point where major pandemic-era rebalancing has run its course—think single-detached versus condos, rural versus urban, and cottages versus travel and other spending. One could argue that some of those shifts went too far during the height to of the madness, and we could see some undoing ahead, even if a lot of the underlying change is permanent.