Home sales in Canada fall 22% from last year as rates rise

Canadian home prices fell again in May, according to CREA. (REUTERS/Dan Riedlhuber)

The Canadian housing market continued to cool in May amid rising interest rates, with the average home price falling to $711,000.

That’s down nearly 11% from March, when the Bank of Canada began raising its benchmark interest rate to fight soaring inflation. However, May prices are still up 3.4% from the same period last year.

The Canadian Real Estate Association (CREA) said on Wednesday that national home sales fell 8.6% on a monthly basis in May, a more moderate decline than the 12.6% drop seen in April, returning activity to pre-COVID levels last seen in the second half of 2019.

The number of transactions last month was 21.7% lower than the record set in May 2021.

“Ultimately, this has been expected and forecast for some time – a slowdown to more normal levels of selling activity and a flattening of prices,” CREA senior economist Shaun Cathcart said in a statement. .

“What’s surprising is how quickly we got here. With the now very rapid pace expected of Bank of Canada rate hikes and fixed mortgage rates that are well above those, instead of maintain steadily over two years, this cooling in sales and prices seems to have mainly played out in the last two months.”

The Bank of Canada has embarked on an aggressive course to tighten monetary policy in the wake of soaring inflation, which has pushed up borrowing costs for Canadians.

BMO Senior Economist Robert Kavcic said in a research note Wednesday that “a Canadian housing correction is well underway in a number of markets.”

“Prices will likely be under pressure next year,” Kavcic wrote.

“Eventually, fundamental factors like demographics and rising construction costs will put a floor under the resale market, particularly in more favorable areas, but it will take time and some price discovery to swallow the shock of prices. interest rate.”

CREA says sales are down in 75% of all local markets, including BC’s Lower Mainland, Greater Toronto Area (GTA), Ottawa, Edmonton and Calgary.

After excluding sales in the GTA and Vancouver, Canada’s two hottest real estate markets, the national average home price was $588,500.

The MLS Home Price Index (HPI), which CREA says is a more accurate price comparison than the median or average price, fell 0.8% on a monthly basis, after falling 1 .1% in April.

Alicja Siekierska is a Senior Reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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