Canada’s real estate hot streak cools as prices and sales fall in March

A decline in sales lowered the national median home price to $796,000

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Canada’s real estate markets experienced a significant slowdown in March as a decline in sales pushed the national median home price down to $796,000.

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While the median price was still up more than 11 percent year over year, it’s down two percent from February’s reading of $816,720, according to data from the Canadian Real Estate Association.

Nationwide home sales volumes were also down in March, falling more than five percent after a short-lived rise in February. The drop was led by declines in markets such as the Greater Toronto Area and Calgary. Newly listed properties also fell about 5.5 percent compared to the previous month. The report noted that this decline brings activity back in line with where it was last fall.

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“While the market remains very active historically, March definitely saw a slowdown compared to February in terms of activity and price growth,” CREA president Jill Oudil said in a statement. “One month is not a trend, so we will 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 property markets in March as many feared another year of runaway price increases.

A month does not mark a trend, so we will have to wait to see if this is the beginning of the long-awaited cooling of this market.

Jill Oudil

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

“I hope it will lock out a lot of young first-time homebuyers with prices that were set amid interest rates that are no longer available,” Cathcart said.

Cathcart added that an increase in the supply of all types of housing would be necessary to reduce the serious imbalance between supply and demand.

The Bank of Canada began raising rates this year, accelerating the process with an aggressive 50 basis point hike in April. Real estate agents are already seeing a change in buyer attitudes as borrowing costs rise. John Pasalis, founder of Toronto-based real estate analytics firm Realosophy Realty Inc., told the Financial Post’s Larysa Harapyn in an interview on April 14 that 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, frankly, and we’ve been seeing it over the last month because five-year rates have risen well before the Bank of Canada raises their rate,” Pasalis said. “Of course, that’s affecting people’s ability to borrow, people’s (willingness) to borrow, and basically we’re seeing a pretty rapid decline in activity and demand in the real estate market right now.”

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Christopher Alexander, president of RE/MAX Canada, told the Financial Post that he is seeing fewer multi-bid situations and fewer showings, though he argued there are still hot spots in the GTA and Calgary areas.

“There has definitely been a change in the general perception of how things are developing,” Alexander said. “There have been a lot of headlines in the media. I think people have been eagerly awaiting the federal government budget (with) lots of comments on interest rates and where they are going. So I think consumers are really taking a wait-and-see approach.”

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

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Despite signs of a slowdown in some markets, Royal LePage expects home prices to grow 15 per cent through 2022 as strong buyer demand outstrips supply. The firm noted that the national aggregate home price has already soared a little over 25 percent year-over-year to $856,900 in the first quarter of this year, which was the company’s highest first-quarter gain on record.

“The first quarter of the year was so strong … that we are upgrading our outlook for 2022,” Royal LePage chairman Phil Soper said in a statement. “And home prices will continue to rise in the coming months as a result of our relentless imbalance between low supply and high demand.”

Robert Kavcic, a senior economist at the Bank of Montreal, doesn’t expect the effects of the rate hikes to kick in until the summer.

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“The reality is that market conditions will probably only show their true colors in late summer, after another 100 (basis points) of adjustment (from the Bank of Canada) and when mortgage pre-approvals expire,” Kavcic wrote in a statement. Tuesday’s note to clients. up to the CREA statistics.

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

“Not that extreme for sure, but we’re going to have to start seeing those inventories come back up before things get anywhere near Goldilocks,” Cathcart told the Post. “We’re still a long way from Kansas right now.”

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