Author of the article: Publication date: Aug 15, 2022 • 2 hours ago • 4 min read • 39 Comments Canadian home listing prices fell 1.7 per cent in July to $789,600, according to data released Monday by the Canadian Real Estate Association . Photo by National Post
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Canadian home sales fell 5.3 per cent in July, marking the fifth consecutive month-over-month decline in sales volume, as higher interest rates continued to dampen demand, new statistics from the Canadian Real Estate Association showed.
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July’s percentage decline, however, was the lowest in five months. The average sales price, not adjusted for seasonality, was $629,971, down five percent from the same month in 2021, the association said. Prices have now fallen for four months in a row. CREA has attributed much of the market’s hold-up to increased mortgage carrying costs after Canada’s prime rate rose by one percentage point in mid-July, the largest increase the country has seen in 24 years. Higher borrowing costs are forcing people to reconsider their housing intentions, sparking what the Bank of Canada in July called a “sharp slowdown” in the housing market. Prospective buyers are bracing for further falls that some expect could come in the fall, while sellers are debating whether they should try to get what they can from their home now or wait for the market to turn in their favor Jill Oudil, chair of CREA, said in a press release.
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“The demand that was so strong just a few months ago has not disappeared, but some buyers will probably stay on the sidelines until they see what happens with borrowing costs and rates. As they re-enter the market, they will find a little more choice, but not as much as you might expect,” Oudil said. (Buyers will) find a bit more choice, but not as much as one might expect Jill Oudil Oudil’s comments echo what real estate agents have been reporting for months: the market is cooling. In typically heated markets such as the Greater Toronto and Greater Vancouver areas, they have seen homes for sale for more than they would last year or at the start of the year. Buyers are now waiting on the sidelines to see how much buying power they could lose as prices rise, but have also held off on bidding because forecasts led them to believe prices will fall even further.
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“A new piece of the puzzle was the decline in new listings in July. It was the same size as the sales decline, and in many of the same areas of the country,” Shaun Cathcart, CREA senior economist, said in the release. “It’s only one month of data at this point, but it suggests that some sellers are also playing the waiting game, and that’s with an overall inventory of homes for sale that is still historically low.” Although overall inventory is at an “all-time low,” Cathcart said, there were 3.4 months of inventory nationally at the end of July 2022, which is well above the 1.7-month all-time low set in early 2022. .
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Most of July’s declines came from purchases across Ontario and, to some extent, British Columbia. Grassland prices were “more or less stable.” Meanwhile, Quebec is showing small dips. On the east coast, prices were on the rise. However, Halifax-Dartmouth fares have stopped. “We’re going to have quite a bit of reduced sales activity,” said Robert Kavcic, an economist at Bank of Montreal. “We’re going to have a gradual increase in inventory out there in the market, and with that, coupled with higher interest rates … all of that combined will continue to drive prices down for the rest of this year.” We will have significantly reduced sales activity Robert Kavcic However, there is one element of the market that has also been noticeably absent, and that is investors. They account for about a quarter of the market in Ontario, for example, and appear to have retreated because of falling prices, Kavcic said. “A market priced for 1.5 percent mortgage rates last year is now operating at 4 or 5 percent mortgage rates,” he said. “Numerically, it just doesn’t work,” he continued. “That process of finding out where the new price level should be is what’s happening right now as well.”
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Historically in Canada, home price corrections have taken two to three years to bottom out. This is in line with current reports on the housing market, where a wave of rate hikes will likely last throughout 2022. Market experts expect rate hikes by the end of this year and the market may take some time to adjust. “Consumers are sensitive to mistakes in interest rates, of course, but most fixed-rate mortgages have already been priced into the Bank of Canada’s expected rate hikes for this year, so it looks like we’re easing in on the softness. and now we’re headed for that soft landing that we thought we’d see,” said Karen Yolevski, COO of Royal LePage Real Estate Services Ltd., in response to the CREA report. • Email: [email protected]
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