Canadian real estate’s brief bounce is beginning to fade. Canadian Real Estate Association (CREA) data shows existing home sales climbed in June, with prices also climbing. However, price growth is notably decelerating at a rapid rate, with new inventory now outpacing sales.
Canadian Real Estate Prices Are Showing Signs Of Fatigue
Canadian real estate prices are still climbing, but showing some signs of fatigue. The composite benchmark, or typical, home price climbed 0.8% (+$5,700) to reach $760,600 in June. Though they remain 4.5% (-$35,700) lower than the same month last year, they’re also the highest since then.
Canadian Real Estate Prices
The price of a typical home across Canada, in Canadian dollars.
Source: CREA; Better Dwelling.
At first glance, that appears to be substantial growth. Most households certainly aren’t seeing a 0.8% increase in their salary in a single month. However, zooming out, we see the smallest monthly increase since January—back when prices made a tiny decline. Home prices are still rising, but it’s certainly not the market seen just a month before.
Canadian Real Estates Remain Significantly Below Peak
The percentage change for the composite benchmark price since peaking in March 2022.
Source: CREA; Better Dwelling.
Comparing 12-month growth can overstate the amount retraced since the correction. Existing homes remain 11.1% (-$95,200) lower than the all-time high reached in March 2022. Peak buyers are still better than the bottom, when prices were 17.6% (-$150,800) lower. If prices continued to increase by $5,700 per month, it would take a little over two years to return to the peak.
Canadian Real Estate Inventory Growth Outpaced Sales
CREA attributes cooling market conditions to moderating sales and loosening inventory. Home sales rose a seasonally adjusted monthly 1.5% in June, while listings climbed 5.9% over the same period. Note that moderating sales doesn’t mean they fell, but are no longer rising at the breakneck speed seen over the past few months (largely due to a base effect).
Inventory outgrowing sales helped to ease market conditions, reflected in the sales to new listings ratio (SNLR). The seasonally adjusted SNLR fell 2.3 points to 63.6% in June, just a few points from returning to a balanced market. Cities like Toronto (54.3% SNLR) notably saw the biggest shift, falling over 12 points in the month, but more on that next week.
Canadian existing home prices are still rising, but the gains are being trimmed as conditions ease. If this continues, the surge in sales may prove to be pent up demand (buyers delayed as prices fell), rather than a return to normal. As interest rates continue to rise, rising inventory is likely to apply more downward pressure on prices.
