Home sales down substantially
The Canadian Press - Feb 15, 2023 - Business Buzz

Photo: The Canadian Press

Home sales in Canada posted their worst start to the year since 2009 as January sales fell 37.1% compared with the start of 2022 and prices continued to fall, the Canadian Real Estate Association said Wednesday.

Home sales for the month amounted to 20,931 and came as the January sales also fell 3% compared with December.

The move lower to start the year gave back the small gains made in December, and CREA said it signals a lack of clarity around whether the market has hit or is nearing the bottom.

“Hope springs eternal that housing activity may be close to a bottom, but we suspect that the market is still digesting the incredibly aggressive rate hikes of the past year,” Douglas Porter, BMO Capital Markets’ chief economist, said in a note to investors.

Porter is looking for further price softness nationally in the months ahead because in the seven past housing corrections in Canada, it took three years on average for prices to hit the bottom and he adds we are just one year from the peak of last February.

The actual average price in January sat at $612,204, an 18.3% dip from $749,437 during the same month last year, CREA said. On a seasonally adjusted basis, the average price in January was $620,605, down 1.8% from December.

The Bank of Canada has raised its key interest rate eight consecutive times since March 2022, driving mortgage rates higher.

However, when carrying out the most recent rate hike, Bank of Canada governor Tiff Macklem said the bank will pause and assess the impact of higher rates on the economy and inflation.

Higher rates have weighed on the housing market with sellers not keen to list homes that will fetch far less than their neighbours’ did months ago, and buyers deterred from making purchases because their borrowing costs are now steep, even as home prices slide.

Porter’s forecast predicts that by the time the current economic cycle is complete, home prices will have fallen by between 20% and 25% from their peak. They had already dropped 10% by early January.

“While the Bank of Canada may be done hiking rates—emphasis on ‘may,’ as the market is now giving high odds to one more move—we suspect that prices have not fully adjusted to the … rate hikes over the past year,” he said.

In P.E.I., the average home price was down 10.2% on a month-over-month basis, while they slid 3% in Ontario, 2.9% in Alberta and 2.6% in B.C.

In taking stock of the declines, TD Economics’ Rishi Sondhi said in a note to investors that “markets had a lot to contend with last month.”

Along with the interest rate hikes, he pointed to the implementation of a foreign buyers’ ban and an anti-flipping tax.

“As such, falling sales and prices last month are not much of a surprise,” he said.


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