Canadian Existing Home Sales (May 2022)

Rishi Sondhi, Economist | 416-983-8806

Date Published: June 15, 2022

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Canadian home sales continue their descent May

  • Canadian existing home sales declined in May, falling 8.6% month-over-month (m/m) to 42.6k units. This marks the lowest level of activity since June 2020.
  • Sales were down in 9 of 10 provinces, with the steepest declines occurring in B.C. (-16.3% m/m), Alberta (-10.5%) and Ontario (-9.9%). Saskatchewan was the only province that saw sales rise (3.8%).
  • New listings increased by 4.5% m/m in May. Combined with the steep sales decline, the sales-to-new-listings ratio dropped 8.2 ppts to 57.5% – its lowest level since April 2019. This means that in the span of 4 months, markets have shifted into balanced territory. The months' supply of inventory jumped to 2.7 months – still below the long-term average.
  • Canadian average home prices dropped 3.8% month-on-month in May, with steep declines in B.C. (-4.7%), Ontario (-2.5%) and PEI (-1.1%). In contrast, relatively large gains were recorded in Newfoundland and Labrador (+1.7%), Alberta (+1%) and Manitoba (+0.9%).
  • The MLS home price index, a more "like for like" measure, declined for the 2nd straight month (-0.8% m/m).  Single family home prices fell 1% while apartment prices inched higher by 0.3%. On a year-on-year basis, detached prices decelerated to a 19.6% gain while condo prices were up 21.4%.  

Key Implications

  • Home sales and prices continued to decline under the weight of higher interest rates. In addition, there may have been some downward pressure from buyer fatigue, after sales were pulled-forward to beat higher rates in late 2021/early 2022.
  • There's a regional story playing out underneath the national headline. Indeed, sales and prices are down disproportionately in Ontario and B.C., which suffered severe affordability deteriorations during the pandemic. Note that activity is also retrenching especially hard in the GTA, where investors have played a relatively large role in the market over the past year. It's also likely the case that some GTA buyers purchased their homes before selling their old ones (thinking the market would remain hot) and are now being forced to accept lower prices to complete their transactions. We would, however, expect this dynamic to run its course in relatively short order. 
  • Activity has also softened in Alberta since February, although sales levels are still quite elevated, and markets are fairly tight. Meanwhile, sales have declined to a lesser degree in the rest of the Prairies and have moved higher in the Atlantic region since February, supported by robust population growth.
  • Moving forward, we expect Canadian average home prices to trend even lower through the rest of the year, reflecting sharply higher interest rates. Compositional effects should also continue to negatively influence average prices, as the exorbitant run-up in prices for more expensive units (like detached homes) during the pandemic gives way to a steeper decline.