A Scotiabank report has painted a somewhat bleak picture of Canada's housing market.
In August, home sales fell for the sixth consecutive month, declining by one percent. Homeowners can take comfort in that this was the smallest of any of the monthly declines this year.
"Since the Bank of Canada began hiking its policy rate in March of this year, national sales have declined by 32%, bringing them closer to pre-pandemic levels," economist Farah Omram wrote. "The average selling prices slightly pared down some of the past few months’ declines in August, ending the month 16% below its February 2022 peak, but 16% above its February 2020 level—right before the pandemic started."
The sales-to-new-listing ratio rose to 54.5 percent as a result in a larger decline in listings in comparison to sales. That's close to the long-term average of 55.1 percent, Omran noted.
"Despite the small uptick in this ratio, the overall more balanced market conditions brought about another decline in the composite MLS Home Price Index (HPI)," she added. which edged down 1.6%...in August compared to July, a small deceleration from July’s 1.7% decline."
On September 7, the Bank of Canada jacked up its policy interest rate by 0.75 percent to 3.25 percent. More increases are expected by year-end to curb inflation, which stood at 7.6 percent nationwide in July on a year-over-year basis.
Omran forecast that Canadian housing markets will "continue to moderate into next year".
"The speed at which the moderation is occurring might seem alarming right now, particularly as they coincide with a changing and uncertain macroeconomic environment, in addition to worsening consumer sentiment," she wrote.
"But this speed is related to many factors (discussed in detail in previous reports, see here for example), including heightened sensitivity to increased rates, investors’ activity, urgent sales, shifts in buyers’ psychology, and self-reinforcing expectations of price declines. But once those settle in, we can expect a more comfortable pace of adjustment."