Canadian Existing Home Sales (October 2022)

Rishi Sondhi, Economist | 416-983-8806

Date Published: November 15, 2022

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Canadian home sales increase for 1st time in eight months in October 

  • Canadian existing home sales increased 1.3% m/m in October although were still 17% below their pre-pandemic levels.
  • Sales were up in eight of 10 provinces, with the steepest increases taking place in PEI (+26.3% m/m), B.C. (+5.8%), Manitoba (2.4%) and Alberta (2.2%). In contrast, sales dropped in Quebec (-2.4%) and Newfoundland and Labrador (-1.5%).
  • New listings increased by 2.2% m/m in October. However, their level remained below the long-term average. Combined with the lesser sales gain, the sales-to-new-listings ratio eased back to 51.6% from 52% in September. Meanwhile, the months' supply of inventories ticked 0.1 percentage points (ppts) higher to 3.8 in October, but remained below the long-run average.
  • Despite the sales gain, Canadian average home prices dipped by 0.6% m/m, with relatively large declines taking place in PEI (-9.8% m/m), Manitoba (-2.8%), New Brunswick (-1.5%) and B.C. (-1.4%). In Ontario, prices dipped 0.5% m/m. In contrast, prices were up in Nova Scotia (+1.2%) and Newfoundland and Labrador (+0.6%), while being flat in Alberta.
  • The MLS home price index, a more "like for like" measure, declined by 1.2% m/m. Single family home prices fell 1.4% m/m. They were down in year-on-year terms (-2.3%) for the first time since late 2019. Meanwhile, apartment prices declined 0.7% m/m, although were up 5.6% in year-on-year terms.  

Key Implications

  • Absent further rate hikes, one could make the case that Canadian housing demand is approaching a bottom. Sales have already cratered by over 40% since February, are trending at levels last consistently seen in 2012, and appear to have undershot levels in line with fundamentals like income and housing supply. And of course, they increased in October, bringing the 3-month moving average of sales growth to -1.7%, the best showing since March.
  • However, we do anticipate further rate hikes by the Bank of Canada, which will continue to weigh on demand and prices. In fact, they should continue dropping through the early part of next year. 
  • Our current forecast sees Canadian average home prices retracing about half of the gains made during the pandemic, although how the supply picture unfolds represents a key risk to this forecast. With homeowners feeling the pinch of higher monthly payments due to rising interest rates, some may be forced into listing their properties (although so far, the level of new supply hitting the market each month remains subdued). If a sufficiently large number of these homeowners end up listing their homes, it could downwardly pressure prices by more than we anticipate.