Canada’s existing home sales fall in May, average home prices to rise moderately in 2017

Canada’s existing home sales dropped 6.2 percent sequentially in May and has come in 1.6 percent below year ago levels. New listings were up 0.3 percent after rising 10 percent in the prior month, leading the sales-to-new listings ratio lower to 56.3 percent and marking a return to balanced territory. The average home price fell 5.2 percent in the month and rose only 4.3 percent year-on-year. On a quality adjusted basis, home prices rose more robustly by 17.9 percent year-on-year with growth in condo prices outpacing single-family home prices for the first time since 2010, noted TD Economics.

The softness in national sales activity in May was mainly because of a 25 percent decline in existing home sales in the GTA market, where sales are now down nearly 30 percent from their peak levels in March. Listings in the GTA have also been recovering, pushing the market towards one where buyers have more bargaining power. Existing home sales also dropped more widely throughout Southern Ontario.

The softness in sales was greatly spread throughout the nation, with most other regional markets also coming off of a solid beginning to the year. The rebound in Vancouver existing home sales stalled in the month. Quebec City and Montreal were the exceptions that saw sales reach new records in May.

In all, average home prices are likely to expand moderately in 2017, before declining by just 2 percent in 2018. But this fall would be entirely due to the home price fall in Ontario/GTA and the compositional shifts as activity rebalances away from higher priced markets, stated TD Economics.