DATE

Canadian Home Sales Down 16% year over year in May

Steve Saretsky -

Canada’s national housing market continued its sluggish performance in the month of May. Despite the warmer weather and usually busy spring selling season, buying activity has been awfully quiet. New mortgage regulations which are now in full swing have stymied fringe buyers, particularly millennials. According to new data from credit bureau TransUnion, new mortgage originations among millennials in Canada fell by 19.5% between the last quarter of 2017 and the first three months of 2018.

That has also been showing up sales data. National home sales declined by 16% year over year for the month of May. This marked the worst year over year decline since May of 2008 when home sales dipped 17%. Total home sales of 50,604 marked the  lowest total since May 2011.

Canada home sales May
Year over year percent change in home sales for the month of May.

Seasonally adjusted home sales edged 0.1% lower on a month over month basis, or 15% on a year over year basis. Either way you slice it not a great month for one of the worlds most resilient housing markets.

As sales continue to slide inventory is slowly beginning to build. For sale inventory crept up by 4% year over year, increasing for the first time in three years.

Canada home inventory
Year over year percent change in inventory.

The average sales price dipped 6% year over year in May, not nearly as bad as April when year over year declines registered a head turning 11% decline. When looking at the smoothed out index of the MLS® HPI prices showed a slight increase of 1% year over year in May. Per the Canadian Real Estate Association this marked the 13th consecutive month of decelerating year over year gains. It was also the smallest year over year increase since September 2009. Condos continue to hold up well as buyers tumble down the housing ladder, HPI prices posted a 13% increase from May 2017.

benchmark price of canadian real estate
MLS Canada Benchmark price

CREA’s chief economist Gregory Klump shouldered much of the blame on tighter borrowing conditions, “This year’s new stress-test became even more restrictive in May, since the interest rate used to qualify mortgage applications rose early in the month. Movements in the stress test interest rate are beyond the control of policy makers. Further increases in the rate could weigh on home sales activity at a time when Canadian economic growth is facing headwinds from U.S. trade policy frictions.”

Klump’s theory stacks up well with recent data which suggests fringe borrowers are being pushed towards the private lending space, particularly in Ontario. Mortgage originations at private lenders in the Q1 2018 rose to $2.09 billion in Ontario, a 2.95% increase from last year. The market share of private lending went from 5.71% of originations in Q1 2017, to 7.87% in Q1 2018, despite originations at other channels dropping.

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022