Canadian Existing Home Sales (June 2021)

Rishi Sondhi, Economist | 416-983-8806

Date Published: July 15, 2021

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Canadian home sales extend decline in June 

  • Canadian existing home sales continued their unwind from the dizzying highs seen earlier in the pandemic in June, falling 8.4% month-on-month. Since peaking in March, home sales are down 25%. The level of sales was still very strong in June, at 50.8k units. 
  • For the second month in a row, sales were lower in every province. The steepest drops were in B.C. (-14.6% m/m) and the Atlantic provinces (down a combined 9.8% m/m). In Ontario, sales fell 9.0% m/m. They posted a much smaller 1.9% m/m drop in Quebec. 
  • Consistent with sales, new listings also fell, dipping by 0.7% m/m. Still, the steeper sales decline brought the sales-to-new listings ratio lower to 69.2% - still indicating tight market conditions. Meanwhile, the months' supply of inventory increased to 2.3 months – a few ticks above March's record low, but roughly 50% below the long-term average. 
  • Canadian average home prices inched higher by 0.1% month-on-month in June after back-to-back declines in April and May. Prices declined significantly in Alberta (-2.8% m/m) and Saskatchewan (-2.4% m/m). In contrast, steep gains were recorded in Nova Scotia (+3.4% m/m), B.C. (+1.9% m/m) and Manitoba (1.7% m/m). In Ontario prices were up 0.4% m/m. For the second quarter overall, Canadian home prices were down by 0.6% quarter-on-quarter – the first such decline since 2020Q2.
  • The MLS home price index, a more "like for like" measure, increased 0.9% m/m. Single family home prices advanced 1.0% m/m, matching May's gain. Apartment prices rose by 0.7% m/m – marking a deceleration from May's increase. On a year-on-year basis, benchmark condo prices were up 12.2% – the strongest advance since 2018, while detached prices increased by 28.6%. 

Key Implications

  • Home sales continue to cool from what were clearly unsustainable levels earlier in the pandemic. June's decline was helped along by stricter stress test rules implemented at the beginning of the month. We expect these rules to continue to weigh on demand in the near-term, although the amount of tightening this time around (+46 bps) pales in comparison to early 2018 (+220 bps), the last time the rules were changed.
  • For the third straight month, benchmark prices have risen faster than average home prices in month-on-month terms. Average home prices can be heavily influenced by transactions on either end of the price spectrum (i.e. compositional effects), while benchmark prices strip away this impact. This could indicate that relatively lower-priced units outperformed in June. Notably, condo sales in markets such as Toronto and Vancouver have picked up from their pandemic lows in recent months. This is the polar opposite of what happened earlier in the pandemic, when sales of relatively expensive detached units dominated, raising average prices. Moving forward, if condos consume a rising share of the overall sales pie (perhaps through strong demand for these units, slowing sales of detached houses, or some combination of both), compositional effects could continue to weigh on average prices.
  • Our forecast anticipates slower price growth in the second half of this year. Beyond the potential impact of compositional forces, softer demand and affordability constraints are expected to weigh on price growth.