Canada’s housing market continued to heat up in May, as both sales and the number of new listings rose in many cities.
National home sales climbed 5.1 per cent from April to May, according to the Canadian Real Estate Association (CREA). The national home price index rose 2.1 per cent to $736,000 – the third consecutive monthly increase this year, but still down 8.7 per cent from May, 2022.
“The rebound has been evident for a number of months at this point, but May really drove the point home with year-over-year comparisons for both national sales activity and national average home price back in positive territory,” CREA chair Larry Cerqua said in a statement. “That being said, the degree to which a recovery will be able to play out on the sales side as opposed to the price side will come down to supply, which remains quite low.”
The number of new properties on the market rose 6.8 per cent month-over-month, but supply remains historically low.
Buyers rushed to the market this spring after the Bank of Canada paused rate hikes in January, sparking hopes of lower mortgage costs. However, the central bank resumed its campaign to tighten monetary policy by raising the policy rate by a quarter of a percentage point to 4.75 per cent last week.
Sales were up in 70 per cent of local markets, including the Greater Toronto Area, Montreal, Greater Vancouver, Calgary, Edmonton and Ottawa, according to a statement released Thursday by CREA.
Ontario cities led the increase in home prices in May. In the Kitchener-Waterloo region, the index rose 3.6 per cent. In Mississauga it was up 3.3 per cent and climbed 3.1 per cent in the GTA. Meanwhile, in British Columbia, the index climbed 1.4 per cent in Greater Vancouver, 0.7 per cent in Victoria and 1.1 per cent on Vancouver Island.
The sales-to-listings ratio in May was 67.9 per cent, down slightly from 69 per cent in April. A higher ratio indicates a seller’s market, and CREA said the long-term average is 55 per cent.
“The 2023 housing puzzle piece that was less obvious was the reluctance of existing owners to take advantage of a slower market to make a move because they don’t want to mess with the ultralow fixed rates they locked in during the COVID-19 pandemic,” CREA senior economist Shaun Cathcart said in the release. “Without existing owners supplying the market with new listings, this housing demand rebound may play out more acutely than might have been expected on the price side this year.”
Toni Martins, a realtor serving clients in the GTA, said that while business returned to normal in March, with homes getting multiple offers, he thinks the recent interest rate hike by the Bank of Canada will push homebuyers to the sidelines again.
“We were getting around 50 to 60 showings in a well-priced property. Right now we’re getting 30,” he said. “On the other hand, we still have those people in the market that have the [mortgage] pre-approval for 120 days … those people are still buying.”
Mr. Martins said many of the first-time homebuyers he’s been working with have household incomes between $180,000 and $240,000.
Bank of Montreal senior economist Robert Kavcic said in a note that, just as the market picked up in March after the central bank’s rate pause, he expects activity to slow after last week’s decision.
“It stands to reason that the bank’s latest 25 basis-point rate hike will again dampen market psychology somewhat and take some steam out of recent activity,” he said.
Mr. Kavcic told The Globe and Mail that he thinks the housing market “really did play a factor in them actually raising rates at the last meeting.
“And if we continue to see this momentum, they will probably move again.”