The Canadian Real Estate Association released its national resale housing figures for May 2018, reporting a drop in home sales and prices.
Month to month, national home sales remained steady, dropping just 0.1%, but year-over-year, sales fell 16.2% to a seven year low for May. This is also 5.5% under the 10-year average for the month.
While sales were down in many parts of the country, Oakville-Milton and the Greater Toronto Area helped offset with small gains.
“This year’s new stress test became even more restrictive in May, since the interest rate used to qualify mortgage applications rose early in the month,” explains Gregory Klump, CREA’s Chief Economist. “Movements in the stress test interest rate are beyond the control of policy makers. Further increases in the rate could weigh on home sales activity at a time when Canadian economic growth is facing headwinds from U.S. trade policy frictions.”
The average sale price dropped 6.4% year-over-year to just over $496,000. As usual, the GTA and Greater Vancouver skewed the average selling price significantly; remove those areas from the equation and the average is just $391,100.
Price gains month to month are improving in the Greater Golden Horseshoe, but compared to the high prices last year, the year-over-year comparisons are still negative. Guelph was the only area to experience a price gain (up 3.8%). The GTA fell 5.4%, Oakville–Milton dropped 5.9%, and Barrie and District decreased 6.3%.
It makes sense to see sales and pricing gradually moderating because new listings are increasing, and after the high prices and sales in 2017, markets should be levelling out.
New listings increased by 5.1% from April to May. As of the end of May, the national inventory was at 5.7 months, which is a three-year high. The long-term average is 5.2 months.
The CREA also adjusted its 2018 activity forecast downward, citing the stress test and expected rises in interest rates. National home sales are now forecasted to come in around 459,900, which is a 11% drop. The lower forecast largely reflects weaker sales in British Columbia and Ontario.
The average price is also expected to drop 2.1% to $499,100. In Ontario, the average price decline is expected to be around 1.7% due to fewer high priced home sales in Toronto. In the busy spring market, the average selling price usually increases, but that didn’t happen this year. The CREA expects spring 2019 to fall back in line with historical trends.
If you want to look even further down the road, the CREA updated its predictions for 2019 with sales levelling out around 474,800 and the average price increasing 3.8% to $518,300.