Home sales in Canada have fallen for the fifth consecutive month and prices continue to fall as rising interest rates keep potential buyers on the sidelines.
The Canadian Real Estate Association (CREA) said Monday that national home sales fell 29.3% from a year ago. Sales fell 5.3% from June, marking the fifth consecutive month of decline, although July’s decline was the smallest of the past five declines. ACI says sales were down in about three-quarters of all local markets, led by the Greater Toronto Area (GTA), Greater Vancouver and Fraser Valley, Calgary and Edmonton.
Home prices also continue to fall, with the average price of a home falling 5% from last July to $629,971. The suppression of sales in the GTA and Greater Vancouver – the two busiest and most expensive housing markets in the country – reduces the national average price by $104,000. The MLS Home Price Index (HPI), which CREA says is a more accurate price comparison than the median or average price, fell 1.7% on a monthly basis as the benchmark price fell at $789,600.
“July saw a continuation of the trends we’ve been seeing for a few months now; sales are falling and prices are falling in some relatively more expensive parts of the country as well as where prices have risen the most over the past couple of years.” , CREA President Jill Oudil said in a statement.
“That said, the demand that was so strong just a few months ago hasn’t gone away, but some buyers will likely stay away until they see what’s happening with costs and pricing. By re-entering the market, they’ll find a little more choice, but not as much as you might expect.”
While the average price of a home fell in July, CREA data shows that prices actually rose on an annual basis in all provinces except Ontario. CREA notes that rising interest rates “disproportionately dampen sales in more expensive markets and market segments” and that a change in the composition of sales “may cause the national average price overestimates the downward pressure on real prices”.
The cooling in the Canadian housing market comes as the Bank of Canada aggressively raises its benchmark interest rate in the wake of soaring inflation. The central bank’s key rate is now at 2.5%, its highest level since 2008. The Bank raised its key rate by 100 basis points in July and another outsized hike is expected next month.
Desjardins senior economist Marc Desormeaux said in a research note on Monday that he expects the average selling price of homes in Canada to continue to fall nearly 25% from the early peak. of 2022 by the end of next year.
“While the pace of sales and price declines eased in July, the trend remains negative,” he wrote.
“The July figures also illustrate the severity of the ongoing correction and the historic level of sensitivity of the Canadian economy to housing.”
Alicja Siekierska is a Senior Reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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