The chief economist of BMO seems to suggest that the Canadian housing market is currently on shaky grounds.
Douglas Porter brought up the notion as part of a broader take about the economies in the U.S. and Canada.
Porter’s post Friday (June 3) came a couple of days after the Bank of Canada increased its interest-setting rate by 0.5 percent, which brought the level to 1.5 percent.
This was the third time that the BoC hiked its rate this year, and it’s not done yet.
In its announcement Wednesday (June 1), the central bank indicated that “interest rates will need to rise further”.
Based on Porter’s piece, this situation doesn’t bode well for the Canadian housing market.
“The rapid rate rise is a clear and present danger to the teetering housing market,” Porter wrote.
Porter noted that “early results from major Canadian cities for May vividly show that conditions are cooling in real time”.
The BMO economist stated that sales in Toronto “tumbled” 38.8 percent year-over-year in May 2022.
In Greater Vancouver, he noted that sales fell 32 percent on an annual basis.
In a June 2, 2022 report, the real-estate board for Greater Vancouver stated that sales declined 31.6 percent compared to May 2021.
As well, May 2022 sales marked a 9.7 percent decrease from the number of homes sold in April 2022.
Over at the Fraser Valley, sales in May dropped 53.9 percent compared to the same month in 2021.
In comparison to sales in April 2022, transactions last month represented a 16.9 percent decline.
The Canadian Real Estate Association has yet to release numbers on a national level.
Porter wrote: “The pullback in sales has now gone far beyond simply reversing the outsized strength a year ago, and is now in well-below-average terrain, with inventories building quickly.” (We can’t help but wonder how loud the cries for ‘more supply’ will be in the months ahead amid fading sales and swelling listings.)”
The BMO economist continued: “The full retreat now underway in housing and the threat of an even more hawkish BoC has also prompted a downgrade of the Canadian growth outlook.”
In their respective reports June 2, the real-estate boards of Greater Vancouver and the Fraser Valley indicated that home prices in May 2022 dropped compared to April.
The boards attributed the fall in sales to rising interest rates.