Home buyers and sellers ‘play the waiting game’ as sales decline for fifth month in a row

Canadian home sellers and buyers are waiting as the housing market continues to react to higher interest rates, while showing signs of stabilization in the coming months.

Home sales between June and July fell for the fifth month in a row, but at a slower pace than previous months, according to the Canadian Real Estate Association.

Sales fell 5.3% in July compared to June on a seasonally adjusted basis, and down 29% compared to July 2021.

The national median home price in July was $629,971, down five percent from a year ago. The average price is significantly affected by the most active real estate markets, the Vancouver and Toronto metropolitan areas, according to CREA.

June’s monthly drop was steeper than July’s, with seasonally adjusted sales down nearly six percent from May, a 24 percent drop from June 2021.

However, June also saw a softer decline than April and May as the market adjusts to higher interest rates triggered by several large rate hikes by the Bank of Canada.

The president of CREA, Jill Oudil, said that the latest figures show the continuation of a trend of months. Sales are slowing and prices are falling in more expensive markets, she said in Monday’s news release.

Demand remains strong, he added, but “some buyers will probably sit on the sidelines until they see what happens with borrowing costs and prices.”

“As they come back into the market, they will find a little more selection, but not as much as you might expect,” he said.

Sellers are also approaching cautiously: New listings are down 5.3 percent month-over-month, the same rate of decline as home sales.

“This suggests that some sellers are also playing the waiting game, and that is with an overall inventory of homes for sale that is still historically low,” CREA Senior Economist Shaun Cathcart said in the statement.

“We have already seen a strong housing market adjustment this year, but we expect it to be short-lived if conditions continue to show signs of stabilizing,” he said.

Vancouver resident Ali Najaf is among the buyers waiting for signs that the market is stabilizing. He has been thinking about buying for two years, but the expensive and volatile market during the pandemic has put him in a difficult position.

You’re encouraged to see prices cool, but you see interest rates rising at the same time and you’re not ready to take the plunge.

Najaf hopes that by the end of the year, the “new normal” for the housing market will be apparent, and then she can make an informed decision about her potential new home.

The Bank of Canada is expected to finalize its remaining rate hikes in the coming months, likely by around 100 basis points, Cathcart said, and many five-year fixed mortgage rates have already priced with those hikes in mind.

Karen Yolevski, chief operating officer of Royal LePage Real Estate Services, said the precautionary increase in fixed rates means people thinking of buying this year can start planning ahead knowing rates probably won’t make another big jump.

“You may not see much fluctuation with the actual mortgage rate you’re paying even after the Bank of Canada raises those rates, if you’re looking at a fixed-rate mortgage,” he said.

Buyers and sellers alike have been waiting, not listing unless absolutely necessary, but Yolevski said September, when home sales historically spike after the summer lull, will be the real test of whether the Canadian housing market has found his new normal.

“When interest rates stabilize and people have a firm idea of ​​what they can afford … we anticipate that at that point people will return to the market.”

“Another month, another leg down for home sales and prices,” TD economist Rishi Sondhi wrote in a Monday statement.

Higher interest rates, including last month’s surprise 100 basis point rate hike, continue to weigh on the market, Sondhi said, with adjustable-rate mortgages now being stress-tested at a rate higher than the previous qualifying threshold, adding further downward demand pressure.

“More downside is likely,” Sondhi wrote, predicting that average Canadian home prices will fall further in 2022 and 2023 as rates remain high and economic growth slows.

Supply issues will persist in the long term, Yolevski said, noting that declines are typically amplified most in markets that saw the biggest gains early in the pandemic.

He said the average sales price is likely to be skewed downward because when interest rates started to rise, pricier markets like Vancouver and Toronto saw sales slow faster than other markets.

With archives from The Canadian Press

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