Canada's housing market continued to slow from its frenzied pace in May.
The Canadian Real Estate Association (CREA) says national home sales fell 7.4 per cent month-over-month, following an 11 per cent decline in April. The drop was widespread, with sales falling in 80 per cent of markets.
But that doesn't mean the bottom is suddenly falling out of the country's red-hot real estate market. It was still the strongest month of May ever. Compared to May 2020, which was the worst month of May since the late 90s, it's a 103.6 per cent increase.
Prices also remain elevated, up 24.4 per cent as measured by the MLS home price index. It's up 1 per cent month-over-month but CREA says the pace of monthly increases is decelerating.
The largest year-over-year price gains have been in Ontario, and CREA says this is where they have been slowing the most month-over-month.
"While housing markets across Canada remain very active, we now have two months of moderating activity in the books, and that goes for demand, supply and prices," said CREA chair Cliff Stevenson.
"More and more, there is anecdotal evidence of offer fatigue and frustration among buyers, and the urgency to lock down a place to ride out COVID would also be expected to fade at this point given where we are with the pandemic."
What it will take to bring home prices down
The national sales-to-new listings ratio was 75.4 per cent in May, which is still well above the long-term average of 54.6 per cent, though well below the 90.7 per cent seen in January.
BMO senior economist Robert Kavcic thinks it's going to take more than slowing sales to bring prices down.
"Home sales have backed off from extreme levels seen in recent months, but current activity is still historically strong and fostering outsized price growth," said Kavcic in a note.
"We believe that sales activity will continue to gradually cool in the year ahead, but it’s going to take higher interest rates to soften the market in a meaningful way."
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.