High borrowing costs and increasing inventory causing a shift to a Buyer's Real Estate Market

The impact of high borrowing costs, high inflation, uncertainty surrounding future Bank of Canada decisions, and slower economic growth continued to weigh on Canadian home sales in September. With sales slowing and new listings returning to more normal levels, demand and supply are continuing to come into better balance. This is giving buyers more time and more choice. 

 

Ontario - Market is Better-supplied with more new listings

Toronto, October 03, 2023 -- The impact of high borrowing costs, high inflation, uncertainty surrounding future Bank of Canada decisions and slower economic growth continued to weigh on Greater Toronto Area (GTA) home sales in September. However, despite the market being better-supplied with listings, the average selling price was up year-over-year.

“The short and medium-term outlooks for the GTA housing market are very different. In the short term, the consensus view is that borrowing costs will remain elevated until mid-2024, after which they will start to trend lower. This suggests that we should start to see a marked uptick in demand for ownership housing in the second half of next year, as lower rates and record population growth spur an increase in buyers,” said TRREB President Paul Baron.

REALTORS® reported 4,642 home sales through TRREB’s MLS® System in September 2023 – down 7.1% compared to September 2022. The year-over-year dip in sales was more pronounced for ground-oriented homes, particularly semi-detached houses and townhouses. On a month-over-month seasonally-adjusted basis, sales were also down slightly.

New listings were up strongly on a year-over-year basis from the extremely low level in September 2022. The number of listings also trended upward on a month-over-month seasonally adjusted basis.

The MLS® Home Price Index (HPI) Composite benchmark was up by 2.4% year-over-year. The average selling price was up by three% over the same time period. On a month-over-month seasonally-adjusted basis, both the average selling price and the MLS® HPI Composite benchmark edged lower by less than one%.

“GTA home selling prices remain above the trough experienced early in the first quarter of 2023. However, we did experience more balanced market in the summer and early fall, with listings increasing noticeably relative to sales. This suggests that some buyers may benefit from more negotiating power, at least in the short term. This could help offset the impact of high borrowing costs,” said TRREB Chief Market Analyst Jason Mercer.

“TRREB’s annual consumer polling has shown that half of intending home buyers in Toronto will be first-time buyers in any given year. The average price of a condo apartment in Toronto is over $700,000. Yet, the first-time buyer exemption threshold for the City’s upfront land transfer tax has remained at $400,000 for a decade-and-a-half. With this in mind, TRREB applauds Toronto City Council for asking City staff to provide a report on a more appropriate exemption level moving forward,” said TRREB CEO John DiMichele. He further stressed that “many housing and taxation policies are currently set in opposition and we need all levels of government to align policies and work together to solve this housing crisis.”

 

Ottawa Home Sales Hold Steady in Lackluster September

Ottawa, October 6, 2023 -- The number of homes sold through the MLS® System of the Ottawa Real Estate Board (OREB) totaled 946 units in September 2023. This was unchanged from September 2022.

Home sales were 29.6% below the five-year average and 23.6% below the 10-year average for the month of September.

On a year-to-date basis, home sales totaled 9,889 units over the first nine months of the year. This was a large decline of 13% from the same period in 2022.

“Sales activity came in right on par with where it stood at the same time last year but was still running well below typical levels for a September,” said Ken Dekker, OREB President. “New listings have surged in the past several months, which has caused overall inventories to begin gradually rising again. However, available supply is still low by historical standards, and we have ample room to absorb more listings coming on the market. Our market is also right in the middle of balanced territory, and while MLS® Benchmark prices are down from last year they are still trending at about the same levels from 2021.”

The MLS® Home Price Index (HPI) tracks price trends far more accurately than is possible using average or median price measures.

The overall MLS® HPI composite benchmark price was $643,600 in September 2023, nearly unchanged, up only 0.5% compared to September 2022.

The benchmark price for single-family homes was $727,500, essentially unchanged, up just 0.6% on a year-over-year basis in September.

By comparison, the benchmark price for townhouse/row units was $510,900, a small gain of 2.5% compared to a year earlier, while the benchmark apartment price was $422,300, falling by 1.1% from year-ago levels.

The average price of homes sold in September 2023 was $675,412, increasing by 2.7% from September 2022. The more comprehensive year-to-date average price was $672,837, a decline of 6.5% from the first nine months of 2022.

The dollar value of all home sales in September 2023 was $638.9 million, up modestly by 2.7% from the same month in 2022.

OREB cautions that the average sale price can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The calculation of the average sale price is based on the total dollar volume of all properties sold. Price will vary from neighbourhood to neighbourhood.

The number of new listings saw an increase of 9.8% from September 2022. There were 2,259 new residential listings in September 2023. New listings were 4.8% above the five-year average and 7% above the 10-year average for the month of September.

Active residential listings numbered 2,997 units on the market at the end of September, a sizable gain of 14% from the end of September 2022. Active listings haven’t been this high in the month of September in five years.

Active listings were 33.9% above the five-year average and 18.5% below the 10-year average for the month of September.

Months of inventory numbered 3.2 at the end of September 2023, up from the 2.8 months recorded at the end of September 2022 and below the long-run average of 3.3 months for this time of 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.

British Columbia - Renewed Bank of Canada Tightening Slows Sales Activity

Vancouver, BC – October 12, 2023 -- The British Columbia Real Estate Association (BCREA) reports that a total of 5,531 residential unit sales were recorded in Multiple Listing Service® (MLS®) systems in September 2023, an increase of 10.4% from September 2022. The average MLS® residential price in BC was $966,530 up 4.8% compared to September 2022. The total sales dollar volume was $5.3 billion, representing a 15.7% increase from the same time last year.

“Home sales in BC have clearly been impacted by the Bank of Canada's recent tightening of interest rates, along with the resulting surge in mortgage rates,” said BCREA Chief Economist Brendon Ogmundson. “Home sales are once again trending at below average levels as potential buyers struggle with a high cost of borrowing.”

 Active listings in the province were up slightly month-over-month at just over 33,000 total listings and were 8.1% higher year-over-year.

 Year-to-date BC residential sales dollar volume was down 15% to $57.9 billion, compared with the same period in 2022. Residential unit sales were down 11.5% to 59,570 units, while the average MLS® residential price was down 4% to $972,049.

 

 

Alberta - Calgary Home Sales at Record Highs in September, Yet Supply Remains a Challenge

City of Calgary, October 3, 2023 – Sales reached another record high in September with 2,441 sales. Despite the year-over-year gains reported over the past four months, year-to-date sales are still nearly 12% lower than last year's levels.

New listings also improved this month compared to last year and relative to sales. This caused the sales-to-new listings ratio to fall to 76%, preventing further monthly declines in inventory levels.

Nonetheless, inventory levels in September remained over 24% lower than levels seen last year and, when measured relative to sales activity, has not changed enough to cause any significant shift in supply and demand balances. As of September, the months of supply has remained relatively low at less than two months.

“Supply has been a challenge in our market as strong inter-provincial migration has elevated housing demand despite higher lending rates,” said CREB® Chief Economist Ann-Marie Lurie. “While new listings are improving, it has not been enough to take us out of sellers’ market conditions.”

In September, the unadjusted residential benchmark price was $570,300, similar to last month and nearly 9% higher than last year.

City of Calgary Housing Stats September

Detached - Inventory levels remained at record lows for the month as the sales-to-new listings ratio remained relatively high at 76%. The decline in inventory levels has been driven by homes priced below $700,000, as supply levels show some improvement for homes priced above this level. While detached sales improved over levels reported last year, much of the gains were driven by the higher-priced properties with some supply options. Overall, homes priced below $700,000 continue to struggle with less than one month of supply.

Despite persistently tight market conditions, the unadjusted benchmark price remained relatively stable this month compared to last month, as a monthly price adjustment in the West end of the city offset monthly gains in all other districts. Overall, at a benchmark price of $696,100, prices are still over 11% higher than levels reported last year at this time, with year-over-year gains ranging from a high of 20% in the East district to a low of 9% in the City Centre.

Semi-Detached - September reported a boost in new listings compared to sales activity as the sales-to-new listings ratio dropped below 70%, the first time it has done that since September of last year. The one-month shift supported a monthly increase in inventory levels, but with 295 units available, inventories have not been this low since September 2005.

Following ten consecutive monthly price gains, benchmark prices in September did ease slightly over the last month. However, at a benchmark price of $621,300, prices are still 11% higher than last year’s levels. The monthly pause in price was primarily driven by adjustments in the West and North West districts, which saw the months of supply rise above levels reported last year and last month.

Row - The pullback in monthly sales outpaced the pullback in new listings, causing the sales-to-new listings ratio to fall to 84%. While conditions are still exceptionally tight, it is an improvement over the 90% average reported since April. The shift also prevented any further monthly declines in inventory levels. However, with less than one month of supply, the persistently tight conditions continue to place upward pressure on prices.

The benchmark price in September reached $419,400, a 1.5% monthly gain and 17% higher than levels reported last year. Price gains have occurred across all districts, with the most significant gains occurring in the most affordable districts in the city.

Apartment Condominium - New listings in September were at the highest levels reported for September, contributing to the record-high sales this month. Year-to-date apartment condominium sales reached 6,286 sales, a 25% gain over last year and a record high for the city. Higher lending rates and tight rental market conditions have kept demand for apartment-style products strong. While inventory levels did see a modest gain compared to last month, thanks to a lower sales-to-new-listings ratio, conditions remain exceptionally tight with 1.5 months of supply.

The persistently tight market conditions have continued to drive further price gains. In September, the unadjusted benchmark price reached $312,800, a 1.2% increase over last month and nearly 15% higher than last year.

REGIONAL MARKET FACTS

Airdrie - With 204 new listings and 144 sales, the sales-to-new-listings ratio dropped to 70%, the first time that has happened since 2020. Improved new listings compared to sales helped support a modest monthly gain in inventory levels. However, September inventory levels are still amongst the lowest levels reported since 2005, keeping the months of supply exceptionally low with just over one month.

The persistently tight market conditions have continued to drive further price gains in the city. In September, the unadjusted benchmark price reached $518,000, reflecting a year-over-year increase of over 8%. Price gains have occurred across all property types, with the largest year-over-year gains occurring in the apartment condominium sector.

Cochrane - Both sales and new listings eased in September, leaving inventory levels relatively stable this month. While inventories are nearly 40% lower than long-term trends for the month, they are not at the record lows seen. The pullback in sales compared to inventory levels also caused the months of supply to push up above two months, the first time we have seen that since February.

While conditions remain relatively tight, the shift likely prevented further upward pressure on monthly home prices. The unadjusted benchmark price in September was $532,700, slightly lower than last month due to pullbacks in the detached, semi-detached, and row sectors. Despite the monthly pause, total residential prices are still over five% higher than September 2022 levels.

Okotoks - With 69 new listings and 52 sales, the sales-to-new listings ratio dropped to 75% in September, the lowest ratio seen since August 2022. The gain in new listings relative to sales prevented any further monthly declines in inventory levels. However, with only 70 units available in September, inventory levels are still amongst the lowest reported monthly levels in over 20 years.

The modest adjustment in both inventory and sales did cause the months of supply to rise over last month’s levels. Still, conditions remain relatively tight, especially for semi-detached, row, and apartment-style properties. As of September, the unadjusted benchmark price was $580,200, nearly 9% higher than last year.