Canadian home sales drop 28% from March peak as interest rates creep up and listings slow

Home sales across Canada fell for the fourth consecutive month in July as the market continued to slow from its March highs.

The Canadian Real Estate Association (CREA) said Monday that seasonally adjusted home sales totalled about 48,686 in July, down 3.5 per cent from June and off 28 per cent from their peak in March. However, the association found that last month's sales drop was the smallest of the four consecutive declines, leaving the month as still the second busiest July on record.

Christine Abankwa, realtor for Royal LePage Signature, says the market is being affected by a rise in rates as well as fewer houses for sale.

The interest rates tend to relax things in the market, which may be what we're seeing here," says Abankwa, adding that last year, even during the height of the COVID-19 pandemic, there was an upsurge in people qualifying to buy homes.

A lot of people thought (then) that the market was probably going to tank, but it did amazing. People slowly realized interest rates are as low as ever and it was a perfect time to enter the market."

CREA reports that the seasonally adjusted number of newly listed homes dropped 8.8 per cent to 65,757 in July from 72,137 in June. As a result, despite sales also slowing, the association found that the national sales-to-new-listings ratio reached 74 per cent, up from 69.9 per cent in June.

Abankwa says fewer homes on the market does slow things down a bit, but says the report accurately depicts the current housing state in the country, especially those living in Toronto. The average national home price reached about $662,000 last month, up 15.6 per cent from July 2020.

Most people that lost their jobs and were affected by COVID-19 were in the service industry," says Abankwa. But so many people are still shopping and can afford the housing that is listed, so even if there's less listed, people will still buy."

There's still a lot of people who are comfortable in our market state, despite the complaints that Toronto is becoming an unaffordable place to live."

July 2020 was the busiest July on record for home sales in Canada. CREA says that while sales are now down a cumulative 28 per cent from the March peak earlier this year, the country's housing markets are still quite active by historical standards.

Abankwa predicts more price appreciation, just not at the same pace as March or April - we're not going to see that again for a little bit."

Shaun Cathcart, CREA's senior economist, says in the report that the slowdown we've seen in home sales over the last few months has not been surprising, given that the level of activity we were seeing back in March was unsustainable.

But we are not returning to normal, we are only returning to where we were before COVID, which was a far cry from normal. The problem of high housing demand amid low supply has not gone anywhere - it's arguably worse."

Abankwa agrees, that while many flourished in March, it was not a sustainable market."

March was way too busy, the prices were too inflated, and the days (homes spent) on market were next to nothing, sometimes only a few hours," she says, adding that she believes the slower pace will be more reasonable for many.

The prices are still going up, but its growing at a more relaxed rate."

Danica Samuel is a Toronto-based staff reporter for the Star. Reach her via email: dsamuel@thestar.ca or follow her on Twitter: @danicasamuel