Residential property sales in Canada and new listings are slowing in a trend that will keep the real estate market balanced and prices stable, it is claimed.
The latest figures from the Canadian Real Estate Association (CREA) show that activity fell nationally by 9.5% in May from near record levels the previous month. This is put down to a combination of changes to mortgage regulations and rising mortgage rates pulling forward a number of sales in April that would otherwise have taken place at a later date.
In more than 70% of local markets activity declines mainly due to fewer sales in Toronto, Vancouver and Ottawa, CREA said.
‘May was the first full month in which sales activity was affected by these changes An accompanying decline in new listings and housing starts means these changes are also affecting the supply side, which will keep the market balanced and Canadian home prices stable,’ said CREA President Georges Pahud.
The seasonally adjusted number of homes that were new listings declined by 4% in May from the previous month. This marks the first monthly decline in new listings in eight months. New listings had been climbing sharply, rising from a four year low last September to the second highest level ever last month.
The number of homes listed for sale at the end of May was up 5.4% from levels at the same time last year, when the supply of homes for sale on the market had started declining.
And the national average price of homes sold rose 8.5% in May from a year ago. This is a smaller increase compared to those recorded over the past nine months.
‘Supply and demand has become more balanced in a number of major markets. Homebuyers now have more choice and are likely be in less of a rush to purchase than they were recently, so the amount of time it takes to sell a home is expected to rise in the coming months,’ said CREA chief economist Gregory Klump.
With last year’s string of downwardly skewed average price values having now mostly passed, year-over-year national average price comparisons are coming back into line with changes in the national weighted average price, he added.
The actual, not seasonally adjusted, number of months of inventory stood at 5.3 months in May, up from 4.8 months at the same time last year. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity, CREA said. On a seasonally adjusted basis, months of inventory stood at 6.1 months in May, the highest level since last April.
‘The number of months of inventory may rise further in response to easing sales activity and a further rise in the number of active listings. However, the number of newly listed homes will ultimately retreat in response to a more competitive sales and pricing environment in a number of local markets. The outlooks for the Canadian economy, employment, and mortgage market trends remain upbeat, so supply and demand will remain balanced on a national basis. Canada will avoid a US style home price correction,’ explained Klump.