Canada’s Housing Market “Slowly Getting Back to Normal”

Home prices are down for the third consecutive month since reaching a peaking in March, according to the Canadian Real Estate Association.

While the average national home price of $679,051 is still up nearly 26% compared to a year ago, it’s down 1.3% from May and has retreated 5.3% from the high of $716,828 reached in March. Removing the high-priced markets of the Greater Toronto and Vancouver areas, the average price still stands at $544,051, up 26.1% from last year.

Home sales were also down in the month, falling 8.4% from May, but is up 13.6% year-over-year.

CREA Chair Cliff Stevenson noted that while things have “noticeably calmed down” in the last few months, he warns that there is still a supply shortage in many parts of the country.

Even though housing inventory is slowly building, the June reading of 2.3 months is still only a slight improvement from the all-time record low of 1.7 months reached in March. Housing inventory is the amount of time it would take to liquidate current inventories at today’s rate of sales.

“…while the frenzy and emotion of earlier in the pandemic seem to have dissipated for now, the key ingredients of a seller’s market are all still in place,” said CREA’s senior economist Shaun Cathcart, noting that the break in population growth experienced during the pandemic is likely coming to an end.

“It’s a long road to get back to normal, and for many housing markets, the main issue is that supply shortages are as acute as ever,” he added.

Cross-Country Roundup of Home Prices

Here’s a look at some more regional and local housing market results for June:

• Ontario: $857,754 (+26.1%)
• Quebec: $452,732 (+22.4%)
• B.C.: $909,810 (+22.1%)
• Alberta: $432,159 (+12.3%)
• Barrie & District: $728,200 (+38.5%)
• Ottawa: $671,400 (+27.9%)
• Halifax-Dartmouth: $468,790 (+27.9%)
• Greater Montreal Area: $498,900 (+27.4%)
• Victoria: $829,600 (+17%)
• Winnipeg: $324,900 (+15%)
• Greater Vancouver Area: $1,175,100 (+14.5%)
• Calgary: $445,000 (+12%)
• Edmonton: $345,600 (+8%)
• St. John’s: $277,500 (+5.9%)

Where does the housing market go from here?

Despite the monthly decline in home sales and average prices, the market still remains strong by historical standards, with June results setting an all0time record for the month, according to Scotiabank’s Farah Omran.

Even so, she notes that the market is “displaying signs of fatigue” and homebuying preferences are started to shift back from the pandemic-driven need for more space. Additionally, many buyers are likely changing their focus to vacations and increased travel over the summer as restrictions continue to ease, Omran noted in a research note.

“Don’t mistake this for a finish line to the rally, however, as persistent tightness in the market, despite the decline in sales, continues to push prices upward, albeit at a slower pace,” she wrote.

BMO’s Robert Kavcic agreed, pointing to the persistence of historically strong demand that will continue to support current prices for the timebeing.

“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,” he wrote.