Canadian Home Sales Climb Toward Sellers’ Market as Inventories Tighten
The Canadian real estate market is experiencing a dynamic shift as home sales continue to rise and inventories tighten. In July, the Canadian MLS® observed a 4 percent month-over-month increase in home sales. This marks the third consecutive month of growth and pushes activity above long-term seasonal norms, setting the stage for a potential sellers’ market.
National Sales Rebound
The strong rebound in national sales reflects a growing interest in the Canadian housing market. Following a challenging period of economic uncertainty and fluctuating demand trends, the recent uptick in sales suggests a positive shift. This growth has been attributed to several factors, including increased consumer confidence and a slight pullback in mortgage rates, specifically, the five-year fixed rates.
Regional Strength
An analysis of major markets reveals that eight of the 13 major Canadian markets reported sales gains. Calgary led the charge with a 6% rise, followed by Ottawa at 5%. Greater Toronto and Greater Vancouver also contributed to this upswing with gains of 4% and 3%, respectively. Other regions such as Montreal, Halifax, and Edmonton noted moderate increases, contributing to the national trend.
Challenges with New Listings
Despite the promising rebound in home sales, the supply side of the equation tells a different story. New listings decreased by approximately 2 percent from June, resulting in comparatively lean inventories relative to recent years. This tightening of supply is becoming a critical factor as it influences both buying behavior and market conditions. The limited availability of new listings is creating heightened competition among buyers, fueling a rise in prices.
Inventory and Market Balance
As the market inches toward balance, the “months of inventory” metric, which currently stands at 6.1 months’ supply, is approaching the traditional five-to-seven-month range associated with a balanced market. However, various markets have already dipped below this threshold, indicating conditions more favorable to sellers. Multiple-offer situations are becoming increasingly common as demand continues to outpace new listings.
Impact on Prices
The national average selling price has been influenced by these market dynamics, climbing approximately 1.5 percent month-to-month to just under $700,000. While the year-over-year price growth remains modest, the increase underscores the pressure that limited supply and increasing demand are placing on prices.
- Mortgage-Rate Backdrop: Though there has been a slight reduction in five-year fixed rates, which has boosted buyer confidence, the rates are still well above pre-pandemic lows.
Emerging Sellers’ Market
The Canadian Real Estate Association (CREA) has issued a warning that unless new listings pick up considerably, more markets could transition into clear sellers’ market conditions. This emerging trend is characterized by demand outstripping supply, resulting in increased competition for available homes. Sellers can capitalize on this by strategically timing their entry into the market.
Outlook for the Future
The future of the Canadian housing market is contingent on several factors:
- Interest-rate Trends: The trajectory of interest rates will significantly influence buyer affordability and activity.
- Affordability Pressures: As prices rise, the strain on potential buyers grows, potentially affecting future sales volumes.
- Homeowner Decisions: Key will be whether homeowners choose to list their properties, thereby addressing the current supply gap.
While the Canadian housing market exhibits strong sales activity and rising prices, the emerging sellers’ market dynamics hinge on the sector’s ability to overcome current supply constraints. As the market evolves, stakeholders will be keeping a close watch on economic signals, housing policies, and demographic pressures to inform both short-term moves and long-term strategies in this vital sector.
