Market Watch - Residential Resale Slowdown Begins A Shift Towards A Balanced Market

Market conditions remained much more balanced in July 2022 compared to a year earlier. As buyers continued to benefit from more choice, the annual rate of price growth has moderated. Less expensive home types, including condo apartments, experienced stronger rates of price growth as more buyers turned to these segments to help mitigate the impact of higher borrowing costs.

Ontario - Residential Resale Slowdown Begins A Shift Towards A Balanced Market

Toronto, August 3, 2022 -- There were 4,912 home sales reported through the Toronto Regional Real Estate Board (TRREB) MLS® System in July 2022 – down by 47% compared to July 2021. Following the regular seasonal trend, sales were also down compared to June. New listings also declined on a year-over-year basis in July, albeit down by a more moderate four%. The expectation is that the trend for new listings will continue to follow the trend for sales, as we move through the second half of 2022 and into 2023.

Market conditions remained much more balanced in July 2022 compared to a year earlier. As buyers continued to benefit from more choice, the annual rate of price growth has moderated. The MLS® Home Price Index (HPI) Composite Benchmark was up by 12.9% year-over-year. The average selling price was up by 1.2% compared to July 2021 to $1,074,754. Less expensive home types, including condo apartments, experienced stronger rates of price growth as more buyers turned to these segments to help mitigate the impact of higher borrowing costs.

"The Greater Toronto Area (GTA) population continues to grow and tight labour market conditions will drive this growth moving forward. Despite more balanced market conditions resulting from rapidly increasing mortgage rates, policymakers must continue to take action to boost housing supply to account for long-term population growth. TRREB has put realistic solutions on the table to address the existing housing affordability challenges. With savings high and the unemployment rate still low, home buyers will eventually account for higher borrowing costs. When they do, we want to have an adequate pipeline of supply in place or market conditions will tighten up again," said TRREB Chief Market Analyst Jason Mercer.

TRREB is also calling on all levels of government to reassess and clarify policies related to mortgage lending and housing development.

"Many GTA households intend on purchasing a home in the future, but there is currently uncertainty about where the market is headed. Policymakers could help allay some of this uncertainty. As higher borrowing costs impact housing markets, TRREB maintains that the OSFI mortgage stress test should be reviewed in the current environment," said TRREB CEO John DiMichele.

"With significant increases to lending rates in a short period, there has been a shift in consumer sentiment, not market fundamentals. The federal government has a responsibility to not only maintain confidence in the financial system, but to instill confidence in homeowners that they will be able to stay in their homes despite rising mortgage costs. Longer mortgage amortization periods of up to 40 years on renewals and switches should be explored," said TRREB President Kevin Crigger.

Ottawa - Residential Resale Slowdown Begins A Shift Towards Balance

Ottawa, August 4, 2022 -- Members of the Ottawa Real Estate Board sold 1,110 residential properties in July through the Board’s Multiple Listing Service® System, compared with 1,718 in July 2021, a decrease of 35%. July’s sales included 840 in the residential-property class, down 36% from a year ago, and 270 in the condominium-property category, a decrease of 34% from July 2021. The five-year average for total unit sales in July is 1,691.

“We are witnessing a profound slowdown in Ottawa’s resale market. July’s numbers reveal that Buyers are indeed putting on the brakes more heavily than what is typically expected during the mid-summer sales dip. Aggressive interest rate increases are surely impacting the decision to buy at the moment as well as other factors that I mentioned last month,” states OREB President Penny Torontow. “But there is a silver lining: with more properties continually being added to inventory, we are on the cusp of returning to a balanced market, and that is good news,” she adds.

“July saw 2,338 new listings added to the housing stock, which is on par with the 5-yr average and 5% lower than last year at this time. Our inventory for residential-class properties is currently around 2.9 months and 2.5 months for condominiums. A market is considered balanced with at least four months of supply, so we are well on our way to that paradigm.”

The average sale price for a condominium-class property in July was $425,694, an increase of 1% from 2021, while the average sale price for a residential-class property was $716,354, increasing 5% from a year ago. With year-to-date average sale prices at $805,238 for residential and $461,557 for condominiums, these values represent an 11% and 9 percent increase over 2021, respectively.*

“The double-digit average price increases that we saw in the past couple of years right up until the early spring have now morphed into single-digit increases, which aligns more with our traditional stable year-over-year price growth. However, it is important to point out that average prices tally the entire spectrum of home sales across the city and region. If you look from neighbourhood to neighbourhood, there are so many differing characteristics and attributes, price increases will certainly fluctuate depending on where you live,” suggests Torontow.

“If you are selling your home, now is the time to be patient as days on market return to more normal timeframes. There are still many Buyers out there, but with more choice, they have less pressure and may take their time. Even though interest rates are still quite reasonable from a historical perspective, consumers are adjusting to this new reality. The rising cost of all goods means people need time to evaluate and adapt their mindsets.”

“I also believe it is time for the federal government to adapt and reassess the stress test. It was originally designed when rates were very low to ensure Buyers could manage rate hikes. With interest rates where they are now, they have to qualify at a 7-8% rate which no longer makes sense and takes many Buyers out of the market.”

“Whether you are a Buyer or a Seller, a professional licensed REALTOR® will help you navigate this shifting resale market. They have access to minute-by-minute sales data and local neighbourhood expertise that will assist you in making the best decisions for your circumstances.”

REALTORS® also help with finding rentals and vetting potential tenants. Since the beginning of the year, OREB Members have assisted clients with renting 3,528 properties compared to 2,706 last year at this time.

British Columbia - METRO VANCOUVER MARKET HIGHLIGHTS

Metro Vancouver, 3 Aug, 2022 -- Metro Vancouver’s housing market has entered a new cycle marked by quieter home buyer demand and a gradual rise in the supply of homes for sale.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 1,887 in July 2022, a 43.3% decrease from the 3,326 sales recorded in July 2021, and a 22.8% decrease from the 2,444 homes sold in June 2022.

Last month’s sales were 35.2% below the 10-year July sales average.

"Home buyers are exercising more caution in today’s market in response to rising interest rates and inflationary concerns. This allowed the selection of homes for sale to increase and prices to edge down in the region over the last three months." said Daniel John, REBGV Chair

There were 3,960 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in July 2022. This represents a 9.5% decrease compared to the 4,377 homes listed in July 2021 and a 24.7% decrease compared to June 2022 when 5,256 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 10,288, a 4.4% increase compared to July 2021 (9,850) and a 1.3% decrease compared to June 2022 (10,425).

“After two years of market conditions that favoured home sellers, home buyers now have more selection to choose from and more time to make their decision,” John said. “In today’s changing housing market, both home buyers and sellers should invest the time to understand what these changes mean for their personal circumstances.”

For all property types, the sales-to-active listings ratio for July 2022 is 18.3%. By property type, the ratio is 11.8% for detached homes, 20% for townhomes, and 24.5% for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12% for a sustained period, while home prices often experience upward pressure when it surpasses 20% over several months.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,207,400. This represents a 10.3% increase over July 2021 and a 2.3% decrease compared to June 2022.

Sales of detached homes in July 2022 reached 523, a 50.2% decrease from the 1,050 detached sales recorded in July 2021. The benchmark price for a detached home is $2,000,600. This represents a 11% increase from July 2021 and a 2.8% decrease compared to June 2022.

Sales of apartment homes reached 1,060 in July 2022, a 36.4% decrease compared to the 1,666 sales in July 2021. The benchmark price of an apartment home is $755,000. This represents a 11.4% increase from July 2021 and a 1.5% decrease compared to June 2022.

Attached home sales in July 2022 totalled 304, a 50.2% decrease compared to the 610 sales in July 2021. The benchmark price of an attached home is $1,096,500. This represents a 15.8% increase from July 2021 and a 1.7% decrease compared to June 2022.

Alberta - Detached home sales decline as apartment condominium sales rise

City of Calgary, Aug. 2, 2022 – Significant slowdowns in the detached and semi-detached market were nearly offset by sales growth in the apartment and row sectors. This left July sales three% lower than levels recorded last year. While this is the second month where sales activity has slowed, total residential sales this month are still amongst the strongest levels recorded in our market.

Rising lending rates are causing shifts within the market and, as a result, new listings for higher-priced product are on the rise relative to sales activity,” said CREB® Chief Economist Ann-Marie Lurie.

Meanwhile, there continues to be a lack of supply for lower-priced detached and semi-detached product. This is driving consumers who are looking for affordable homes to purchase apartment- and row-style properties.”

Residential new listings in the city declined compared to what was seen in 2021, but when considering the dynamics between price ranges, we are seeing a different trend play out. Listings for homes priced below $500,000 fell by 18%, while levels rose by 20% for homes priced above $500,000. This has left conditions to remain relatively tight in the lower-end of the market while conditions are shifting toward more balanced levels in the upper-end of the market.

When considering the relationship between the supply and demand, the months of supply has continued to trend up from the exceptionally tight conditions seen earlier in the year. However, with just over two months of supply, the market remains far tighter than anything experienced throughout the recessionary period experienced prior to the pandemic.

As expected, the benchmark price did see some slippage relative to levels seen earlier in the year and rising lending rates have cooled much of the bidding war activity that was driving significant gains earlier in the year. However, prices currently remain over 12% higher than last year’s levels, still outpacing forecasted price growth for the year.

“As we move forward, we do anticipate further rate gains will weigh on housing activity and prices, but not enough to completely offset the exceptionally strong gains recorded over the first half of the year,” said CREB® Chief Economist Ann-Marie Lurie.

Detached - In July, detached sales reached 1,136, which is 19% lower than last year’s levels. Higher lending rates are driving more consumers to look for affordable product, however, the detached sector has struggled with supply levels for lower-priced homes. While we are seeing balanced conditions in the upper-end of the market, conditions remain exceptionally tight in the lower-end of the market.

The decline in sales was mostly driven by pullbacks in the lower-price ranges due to lack of availability. Nearly 80% of the inventory available is priced over $500,000 and new listings for homes priced under $500,000 are half of the levels seen last year.

With a benchmark price of $643,600 in July, levels are still nearly 15% higher than last year. However, we are seeing some monthly adjustments as prices trended down across all districts in July compared to last month.

Semi-Detached - For the third month in a row, semi-detached sales saw less sales than levels reported a year ago. While year-to-date sales remain over 11% higher than last year’s levels, this is a significant shift from the 40% growth recorded after the first quarter of the year. This pullback in sales was met with lower listings levels, but not enough to prevent some upward trend growth in inventory levels and the months of supply. The months of supply pushed up to 2.5 months in July, the first time it has pushed above two months since October of last year.

While conditions remain relatively tight in the lower-price ranges, the benchmark price did trend down relative to levels seen earlier in the year. However, like the detached market, prices remained significantly higher than levels reported last year.

Row - While levels cooled relative to the spring, row sales reached a new record high for July contributing to year-to-date sales growth of 54%. Most of the gains were driven by product priced between $300,000 to $500,000, which also saw the biggest boost in new listings so far this year.

Both new listings and sales have trended down from levels seen earlier the year. However, the gap between sales and new listings narrowed over the past few months causing inventories to trend down compared to earlier in the year. This has ensured that the months of supply remained below two months. The persistently tight conditions prevented any significant adjustment in monthly prices in July.

Apartment Condominium - Like row properties, apartment condominium sales trended down from earlier in the year but maintained a record high level for July, contributing to a year-to-date gain of 66%. Rising lending rates and available supply in the condominium sector helped support the year-over-year sales growth seen so far this year.

While trending down from earlier in the year, new listings in July remain 24% higher than last year’s levels supporting a sales-to-new-listings ratio and a months of supply that reflect relatively balanced conditions. With conditions not as tight as earlier in the year, the pace of price growth has also slowed. In July, the benchmark price reached $278,800, slightly higher than last month and nearly 10% higher than last year’s levels.

Although conditions remain relatively tight, home prices did trend down relative to previous months. Home prices in Okotoks rose far above expectations earlier in the year and despite recent adjustments that have occurred over the past two months, July prices are still over 16% higher than levels seen last year and nine% higher than levels reported in January.