Canadian existing home sales jump in May, but remain at multi-year lows

Canada’s existing home sales rose 56.9 percent month-on-month in May as buyers came back. Home sales had dropped to their weakest level on record in the prior month owing to the pandemic. However, the large gain recorded in May has retraced around one third of activity lost between February and April, and sales continued to be at multi-year lows.

Province wise, sales rose in nearly every province, led by Quebec, recording a jump of 107.3 percent. Meanwhile, sales dropped 18 percent in Newfoundland and Labrador, although that province was the only one to see rising sales in April. Sales growth came in solid in the largest metropolitan markets, rising 53 percent sequentially in GTA, 92.3 percent in Montreal, 31.5 percent in the GVA, 68.7 percent in Calgary, 45.6 percent in Winnipeg and 30.5 percent in Ottawa.

National new listings rose at an even greater rate, rising 69 percent sequentially. Every province recorded higher listings in the month. With listings rising at a more rapid rate than sales, the national sales-to-listings ratio fell to 58.8 percent in May.

Meanwhile, the average home price rose a bit in May by 0.8 percent, stimulated by a 5.8 percent rise in Ontario. Prices also rose markedly in PEI and Alberta. On the contrary, falls were seen in four provinces, with B.C., the largest drag, while prices were effectively flat in Quebec.

“A wave of pent-up housing demand was unleased in May, as every province eased social distancing measures (albeit to varying degrees). What's more, early indications suggest to continued recovery, suggesting that another solid gain is in store for June. With the level of activity still at multi-decade lows, pent-up demand is likely to fuel additional gains for at least another few months. The big question is what happens after this initial burst. Our expectation is that softer population growth, a slow recovery in job markets and CMHC tightening measures will moderate growth in sales and prices towards the latter part of the year and into 2021”, stated TD Economics in a research report.