Canadian home sales pull back In September

National home sales (seasonally adjusted) fell 2.1% m/m in September. This marks the fourth consecutive month of flat or declining sales. Sales fell in over half of local markets, led by Vancouver, Calgary and Toronto.

Market conditions overall remain balanced, with new listings retreating a similar 2.1% m/m in September, though continue to favour sellers at the margin. The national average new-listings-to-sales ratio was unchanged at 1.76 last month, while the number of months of inventory inched up to 5.7.

"The national average house price edged down 0.8% m/m in September, with the y/y increase moderating to 6.1%. The average continues to be skewed by strong sales and price gains in Canada's two most expensive markets; excluding Vancouver and Toronto, average prices were up just 2.9% y/y",notes Scotiabank.

Canada's strong national home sales performance through the spring, fuelled in part by early-year mortgage rate declines, is giving way to a more measured pace of activity, including in the red-hot Toronto and Vancouver markets. Even so, activity remains elevated, with national sales over the first nine months of the year up 5% from a year earlier, and still on track to post the second best year on record (after 2007). Sales continue to trend above their decade average.

The recent pullback in sales in Toronto and Vancouver likely reflects a combination of affordability pressures and a lack of listings in the coveted single-family home segment. Housing demand remains historically high in both markets, with tight supply and strong population growth continuing to fuel outsized price increases across market segments, including for townhomes and condominiums. In contrast, housing demand continues to soften in Calgary alongside deterioration in employment and income prospects and less favourable population dynamics, though pricing so far has remained fairly stable.

"The persistence of ultra-low borrowing costs combined with favourable homebuying demographics (e.g. immigration, millennials) should support healthy national sales activity through the fall, albeit with ongoing large regional market disparities. However, there is a risk that increased economic uncertainty and market volatility could lead to a bigger pullback in hiring, consumer confidence and household spending", added Scotiabank.