Canada’s hot housing streak cools as prices, sales fall in March

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Canada’s real estate markets saw a significant slowdown in March as a decline in sales pulled the national average price of a home down to $796,000.

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While the average price was still up more than 11 per cent year-over-year, it fell two per cent from the February reading of $816,720, according to data from the Canadian Real Estate Association.

National home sales volumes were also down in March, falling by more than five per cent after a short-lived surge in February. The drop was led by declines in markets such as the Greater Toronto Area and Calgary. Newly listed properties also tumbled by about 5.5 per cent versus the prior month. The report noted that this decline puts activity back in line with where it stood last fall.

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“While the market remains historically very active, March definitely saw a slowdown compared to February in terms of both activity and price growth,” CREA chair Jill Oudil said in a release. “One month does not make a trend, so we’ll have to wait and see if this is the beginning of the long-awaited cooling-off of this market.”

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CREA senior economist Shaun Cathcart said it was a positive sign to see some moderation in the housing markets in March, since many were dreading another year of rampant price gains.

One month does not make a trend, so we’ll have to wait and see if this is the beginning of the long-awaited cooling-off of this market

Jill Oudil

Rising mortgage rates were part of that equations. But Cathcart told the Post not all home buyers would be affected equally, with first-timers now facing an even higher burden.

“I would expect that it will shut a lot of first-time, young homebuyers out of the market with prices that were established amid interest rates that are no longer available,” Cathcart said.

Cathcart added that a boost in supply across all housing types would be necessary to lessen the severe demand-supply imbalance.

The Bank of Canada began raising rates this year, accelerating the process with an aggressive 50-basis point hike in April. Realtors are already seeing a shift in buyer attitudes as the costs of borrowing rise. John Pasalis, founder of Toronto-based real estate analytics firm Realosophy Realty Inc., told the Financial Post’s Larysa Harapyn in a an interview April 14 he was seeing an impact from the Bank of Canada’s moves.

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“We’re seeing the impacts of higher interest rates on the ground, quite frankly, and we’ve been seeing it for the past month or so because five-year rates have been increasing well ahead of the Bank of Canada raising their rate,” Pasalis said. “Of course, that’s impacting people’s ability to take on debt, people’s (willingness) to borrow, and we’re basically seeing a pretty rapid decline in activity and demand in the housing market right now.”

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Christopher Alexander, president of RE/MAX Canada, told the Financial Post he’s seeing fewer multiple offerings situations and fewer showings, though argued there are still hot pockets in the GTA and Calgary areas.

“There’s definitely been a shift in just overall perception of how things are unfolding,” Alexander said. “There’s been a lot of headlines in the media. I think people have been eagerly awaiting the budget from the federal government (with) tons of talk about interest rates and where they’re going. So, I think consumers are really taking a bit of a wait and see approach.”

He said sellers will have to adjust their expectations as a result: He said many are demanding a higher price than warranted and expect the property to sell quickly.

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Despite the signs of slowdown across some markets, Royal LePage is expecting home prices to grow 15 per cent over 2022 as strong buyer demand outpaces supply. The firm noted the national aggregate home price already soared just over 25 per cent year-over-year to $856,900 in the first quarter this year, which was the highest first quarter gain the company recorded.

“The first quarter of the year was so strong … that we are bumping up our 2022 outlook,” Royal LePage president Phil Soper said in a release. “And, home prices will continue to climb in the months ahead as a result of our relentless low supply-high demand imbalance.”

Robert Kavcic, senior economist at the Bank of Montreal, does not expect the effects of the rate hikes to take hold until summer.

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“The reality is that market conditions will probably only show their true colours by late summer, after another 100 (basis points) of (Bank of Canada) tightening and when mortgage pre-approvals are expired,” Kavcic wrote in a Tuesday note to clients leading up to the CREA statistics.

Cathcart acknowledged that for now, it is still a seller’s market.

“Not as extreme for sure, but boy, we’re going to have to start seeing those inventories come back up before things get anywhere close to Goldilocks,” Cathcart told the Post. “We’re still a long way from Kansas at this point.”

• Email: shughes@postmedia.com | Twitter: StephHughes95