Canadian Existing Home Sales (June 2018)

Ksenia Bushmeneva, Economist | 416-308-7392

Date Published: July 16, 2018

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Led by the GTA, existing home sales sprang to life in June

  • Existing home sales rose by 4.1% in June, marking the second consecutive month of gains after an upwardly revised May print (0.6%; was -0.1%). 
  • The pickup in sales was broad-based. More than 60% of local markets reported increased activity, led by the Greater Toronto Area (GTA) where sales surged 16.6% on the month. Sales also rose in Calgary (+6.1%) and Winnipeg (+8.6).  Meanwhile, activity in Greater Vancouver continued to moderate, and sales were also lower in Edmonton (-0.9%), Regina (-0.4%), Ottawa (-1.2%). 
  • Higher sales were met by a decline in inventory. New listings slipped by 1.9% in June. As a result, the national sales-to-listings ratio rose to 54.3% from 51.2% in May, moving the market a step closer to sellers' territory (defined as readings above 60%). Listings declined across all provinces.  
  • The average home prices rose for the third straight month in June (+1.7%), but still remains 1.4% below its year ago level. A better measure of price growth, the quality adjusted MLS home price index, was up 0.9% from its year ago level, only slightly lower than 1% y/y gain seen last month, suggesting the market is stabilizing. Declines are starting to ease in the GTA, with prices down 4.8% y/y – better than the 5.4% decline in May. Prices were below their year ago levels in most other major cities, with exception of Ottawa and Montreal, where home prices continue to rise at a robust pace of 7.9% y/y and 6.5% y/y, respectively.  

Key Implications

  • This was a goldilocks report. Sales rose for the second month in a row with broad-based gains across the country while home prices continued to stabilize. A decline in inventory further tightened the market conditions. Taken together, these changes support the notion that housing market is stabilizing after significant volatility in the first half of the year related to the implementation of B-20 rules.  
  • For the second quarter overall, sales are down 3.1% relative to their first quarter average, with lower activity expected to weigh on economic growth in Q2. However, the extent of the drag should be materially lower than in the first quarter, when sales dropped by a whopping 13.3%. 
  • All in all, the effect on the housing market activity from the implementation of B-20 rules appears to be easing. Historically, the impact of policy changes is swift but short-lived, and it seems that housing market is once again finding its footing. We expect that resale activity hit its trough in Q2 and will begin to gradually recover thereafter. As a result, residential investment should start contributing positively to GDP growth in Q3 and Q4 of this year. The latest Bank of Canada Senior Loan Officer Survey also indicated easing credit conditions for mortgages amid increased competition among lenders. The easing of credit conditions should further facilitate normalization of housing market activity.