CANADA HOUSING MARKET: STILL AT THE DOORSTEP OF A RECOVERY, BUT HESITANT TO KNOCK AT THE DOOR
SUMMARY
National housing resale conditions softened from June to July as reflected by the modest decline in the sales-to-new listings ratio. Over this period, national sales declined by 0.7% (sa m/m) while new listings increased 0.9%. In July, sales were higher by 4.8% (nsa) compared to the same month in 2023.
After increasing from May to June, the sales-to-new listings ratio—which reflects how tight resale conditions are—edged down to 52.7% from June to July, essentially back to its May level, and still within the range for balanced national resale market conditions (of between 45% to 65%).
Months of inventory remained unchanged over this period at 4.2, still below its long-term (pre-pandemic) average of 5.3. And since the national market aggregates very different regional markets, there are wide variations in terms of how this indicator compares to its long-term average across provinces, ranging from less than 2 weeks above average in Ontario and British Colombia and Ontario to 5.7 months below in New Brunswick.
About 2/3 of the markets witnessed a decline in their sales-to-new listings ratio from June to July. Consequently, the number of sellers favouring markets declined from 10 in June to 5 in July while the number of balanced markets increased from 16 to 22.
Sales declined in over half of the markets we monitor from June to July. The largest decline was observed in Kingston at -12.7% (sa m/m), and the second largest in Regina at -6.8%, leading to a significant decline (by more than 8 percentage points) in their sales-to-new listings ratio. Sales increased in 14 markets, with the strongest rise for Charlottetown (PEI) at near 28%, and the second largest for Peterborough at 8.3%. As result of this strong monthly sales increase, the sales-to-new listings ratio in Charlottetown has risen by above 14 percentage points, from 48.6% in June to near 63% in July, approaching sellers favouring conditions.
Newly listed properties increased in nearly 2/3 of the markets we track. The strongest monthly increases were observed for Calgary (10% sa mm) and Peterborough (8.4%). For the latter, this strong monthly rise in new listings was almost identical than for sales, which led its sales-to-new listings ratio to stay near its June level. Monthly declines were observed for 11 markets, with the strongest seen in Moncton (-10.5%).
The MLS Home Price Index (HPI) increased by 0.2% nationally from June to July (sa m/m), but declined by 3.9% from July 2023 to July 2024 (using nsa figures). This house price index has been relatively stable since December of last year (using sa figures). From June to July of this year, the national MLS HPI index increased for most unit types except for townhouses which was unchanged. All unit types contributed to the decline in this house price index over the period July 2023 to July 2024.
IMPLICATIONS
We are still expecting a recovery in the resale market but the July figures suggest that buyers are still hesitant. This recovery should be helped by now clearer signs that the monetary policy interest rate is on a downward path, with the reductions announced by the Bank of Canada on June 5th and July 24th and the dovish tone of its recent communications. This is likely raising potential buyers’ confidence about future economic and income conditions. Nevertheless, buyers might still need more encouraging signs as the impact on home ownership affordability from expected weaker interest rates is modest given the elevated level for house prices. Buyers must weigh this hesitancy with the expected upward trend in house prices in the foreseeable future due to the (infamous) structural supply shortage. By itself, this expected trend house price increase is supporting demand and the resale market. Hence, we are probably still at the doorstep of this recovery, but too shy to knock at the door.
![Table 1: Sales, New Listings, Average Price, MLS HPI, Sales-to-new Listings Ratio, Months Inventory; Chart 1: Home Sales for Select Cities](/content/experience-fragments/scotiabank/global_economics/en/housing_news_flash/2024-08-15/master/_jcr_content/root/image_copy_127669735.img.png/1723756879592.png)
![Scotiabank Housing Market Watch—July 2024](/content/experience-fragments/scotiabank/global_economics/en/housing_news_flash/2024-08-15/master/_jcr_content/root/image_copy_1917385426.img.png/1723756888900.png)
![MLS Home Price Indices — Western Canada](/content/experience-fragments/scotiabank/global_economics/en/housing_news_flash/2024-08-15/master/_jcr_content/root/image_copy_1246370331.img.png/1723756898905.png)
![MLS Home Price Indices (cont.) — Eastern Canada](/content/experience-fragments/scotiabank/global_economics/en/housing_news_flash/2024-08-15/master/_jcr_content/root/image_copy.img.png/1723756907222.png)
![MLS Home Price Indices (cont.) — Eastern Canada and Canadian Aggregate](/content/experience-fragments/scotiabank/global_economics/en/housing_news_flash/2024-08-15/master/_jcr_content/root/image.img.png/1723756915594.png)
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