The average price of a Canadian home sold in August was $637,673, a number that has fallen by more than 20 per cent since February.
The Canadian Real Estate Association said Thursday that the number of homes that sold on the real estate group’s Multiple Listing Service has now fallen for six months in a row, since the Bank of Canada began to raise interest rates in March.
Home sales are down by 24 per cent from this time last year. And the average selling price has lost almost $200,000 since hitting an all-time high of $816,720 in February.
While down from the peak, August’s average selling price is a slight uptick from the $629,971 seen the previous month.
Rishi Sondhi, an economist with TD Bank, says it would be a mistake to deduce from that uptick that the market has turned, since “it was mostly fuelled by a bounce in Toronto, where it would be tough to argue that conditions have reached a turning point.”
Caution in Toronto, buyer’s market in Vancouver
Nasma Ali, founder of real estate brokerage One Group, says Toronto’s housing market is like “night and day” compared to what it was last year, or even in early 2022, before rate hikes began.
“People are much more cautious and fearful of jumping into the market right now,” she told CBC News in an interview Thursday. “It’s not just rates, [it’s] inflation, the economy and a looming recession.”
On the other side of the country, in Vancouver, mortgage broker Simon Bilodeau says the market has tipped back into buyers’ favour.
“People that had maybe given up last year because of all the competition and difficulty to get their hands on something started to come back,” he said.
“With the speed at which the Bank of Canada increased the rates, it was to be expected that the real estate market was going to cool off.”
Economist Robert Kavcic with Bank of Montreal says that after surging in the pandemic because of low rates, the volume of home sales is now back to about what it was before COVID-19.
But there is still a wide gap between what sellers had gotten used to, and what buyers will now accept.
“The standoff between sellers who need to come to the reality that early-2022 prices don’t exist anymore and buyers who simply can’t pay as much will continue,” he said. “And the process could be drawn out until well into next year.”
Market ‘still active’
Homeowner Pierre Béchereau is seeing the slowdown from both sides, as a buyer and a seller, because he is in the midst of trying to sell his home in Toronto’s east end to move to a different part of the same city.
“I’m not too worried about where the market is at the moment because if it’s high and I sell … I know it’s going to be harder to find a place, and if the market is not that hot it also means it’s going to be easier to buy,” he told CBC News in an interview.
“It’s definitely not as hot as what it was before, but I think it’s still active.”
Mortgage rates have soared from about 1.5 per cent at the start of the year to more than five per cent now, and that’s going to take several more months for the full impact to be felt, Kavcic said, noting that some buyers who started looking in the spring might still be pre-approved at rates much lower than they are today.
“If you can buy at a discount with a mortgage rate that no longer exists, it could be enticing. But the bigger picture is that there is still an extremely heavy interest rate shock to absorb, and it will likely take more time to play out,” he said.