Yahoo Finance Canada real estate: Home sales down in May, listings up slightly amid 'sleepy month'
Canadian home sales fell 0.6 per cent in May from April, and were down 5.9 per cent on an annual basis, according to the latest data from the Canadian Real Estate Association (CREA).
The price of an average home in Canada also slipped to $699,117 in May, CREA says, down four per cent on an annual basis. CREA’s Home Price Index, which the industry group says is a more accurate price comparison than the median or average price, fell 0.2 per cent on a monthly basis in May.
The number of newly listed properties continued to tick up, increasing 0.5 per cent in May compared to the previous month, marking the second straight monthly increase in listings. As of the end of May, CREA says there were 175,000 properties listed for sale across the country, up 28.4 per cent compared to the same time last year, although still below historical averages.
"May was another sleepy month for housing activity in Canada, although it may prove to be the last of those now that interest rates have moved lower,” CREA senior economist Shaun Cathcart said in a statement, adding that "the psychological effect for many who have been sitting on the sidelines was no doubt huge." Still, some economists say it will take more interest rate cuts to spur a significant rebound in housing activity.
The Bank of Canada cut its benchmark interest rate by 25 basis points to 4.75 per cent on June 5, the first reduction in more than four years, and says further cuts may be coming if inflation continues to ease.
"May's tepid performance kept the narrative of a soft spring selling season intact, as elevated borrowing costs and Bank of Canada uncertainty kept buyers on the sidelines," TD economist Rishi Sondhi wrote in a research note on Monday.
"We're expecting a firmer performance in June amid a decline in bond yields, consistent with the signal from the higher frequency data we track."
Sondhi says the Bank's June cut "probably hasn't moved the dial on affordability much" but that further rate relief "should set the stage for a stronger second half of 2024."
"The gradual unwinding of interest rate hikes, which began recently, may bring some buyers back to the market this summer, hoping to find the sweet spot between lower mortgage rates and the possibility of rising home prices as demand picks up," Desjardins economist Kari Norman wrote in a research note on Monday.
"Still, we expect that it will take more meaningful rate relief before we see any significant rebound. The Bank of Canada will undoubtedly be watching this carefully, since shelter is now the largest component driving inflation."
The Bank of Canada has said one of the key risks to inflation going forward was if home prices increase faster than expected nationwide.
Home sales increased on a monthly basis in British Columbia (1.9 per cent) and Alberta (2.5 per cent), with Calgary seeing sales pick up 6.2 per cent. At the same time, sales fell on a monthly basis in Ontario (two per cent), with Toronto sales declining 1.8 per cent, and in Quebec (2.4 per cent), with Montreal sales falling 1.9 per cent. Prices were up on a monthly basis in British Columbia (two per cent) and Alberta (1.4 per cent), while prices were flat in Ontario (0 per cent change from April) and in Quebec (down 0.1 per cent).
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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