Canadian Existing Home Sales (February 2023)

Canadian home sales increased in February  

• Canadian existing home sales increased 2.3% month-on-month (m/m) in February, although the level of sales remained near the lows last seen in 2001. 
• Sales were higher in 7 of 10 provinces, led by Newfoundland and Labrador (+14%) and B.C. (6.9%). Meanwhile, sales advanced 2.6% in Ontario. In contrast, they suffered a relatively large decline in Manitoba (-7.9%).
• New listings plunged 7.9% m/m in February and remained below their long-term average. Combined with the sales increase, the sales-to-new-listings ratio jumped to 58.4% the highest since last April. Meanwhile, the months' supply of inventories dipped 0.1 to 4.2 months. This measure also remains below its long-term average. 
• Canadian average home prices increased 1.7% m/m in February, marking the first such gain since August 2022. By province, steep monthly gains were recorded in B.C. and PEI (both at +2.9%). Meanwhile, prices were flatter in Quebec (+0.5%) and Ontario (+0.3%). In contrast, prices declined in Manitoba (-2.6%) and Alberta (-0.6%).
• The MLS home price index, a more "like for like" measure, declined by 1.1% m/m. Single family home prices fell 1.2% m/m. In year-on-year terms, they were down 17.5%. Meanwhile, apartment prices declined 1.5% m/m. On a year-on-year basis, they fell 7.9%.  

Key Implications

• With February's gain, sales growth is now essentially flat on a 3-month moving average basis and suggests that a bottom in activity could be forming, at least in the near-term. That said, tighter rules governing mortgage lending are in the pipeline (although the timing of their implementation is uncertain), which should negatively impact sales and prices.
• Average home prices picked up for the first time in six months, although benchmark prices fell. This suggests some compositional forces may have been at play (i.e. sales composition skewing to higher-valued units pushing up the average price compared to the quality-adjusted measure). The divergence between the two also suggests that we may not be out of the woods yet with respect to price weakness. That said, a lack of available inventory likely supported price levels (while restraining sales) last month.

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