National home sales in Canada fell in May after setting an all-time monthly record the previous month with a decline of 2.8% recorded, the latest index data shows.
The figures from the Canadian Real Estate Association (CREA) also show that the national average price has increased by 13.2% year on year but when Greater Toronto and Greater Vancouver are excluded this drops to 9.1%.
Sales activity dropped in about 70% of all markets, led by those in British Columbia and Ontario where the number of homes listed for sale has fallen to multi-year or all-time lows.
‘National sales activity is still strong, even after coming off the record levels of the past couple of months. But, there are housing markets where sales continue to reflect a cautious mood among homebuyers and uncertainty about the local economy,’ said CREA president Cliff Iverson.
According to CREA’s chief economist Gregory many of the housing markets in BC and Ontario that led the monthly decline in national sales are also places where months of inventory have fallen to all-time lows.
‘This suggests a lack of supply may be starting to rein in sales amid a continuation of strong housing demand,’ he explained.
While nine of the 11 markets tracked by the index posted year on year price gains in May, price growth among housing markets continues to vary widely. Greater Vancouver recorded the biggest rise at 29.7% then the Fraser Valley at 31.7%.
Next was Greater Toronto where prices rose by 15% year on year, while in Victoria they rose 13.9% and in Vancouver Island by 9.5%. By contrast, prices fell by 3.9% in Calgary and by 2.3% in Saskatoon.
There were smaller year on year prices rises in other locations. In Regine they increased by 3.4%, in Ottawa by 1.3% and in Greater Montreal by 1.9%. Home prices in Greater Moncton recorded their tenth consecutive year on year gain, up 8.2%.
The index report also points out that the national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets. The actual, not seasonally adjusted, national average price for homes sold in May 2016 was $509,460, up 13.2% year on year.
However, if these two housing markets are excluded from calculations, the average price is a more modest $375,532 and the year on year gain is trimmed to 9.1%. But the report explains that even then, this reflects a tug of war between strong average price gains in housing markets around the GTA and in British Columbia versus flat or declining average prices elsewhere in Canada.
Indeed, the average price for Canada net of sales in British Columbia and Ontario in May 2016 was down 0.7% year on year to $310,007.
The index also shows that the number of newly listed homes fell by 3.2% month on month and new supply was down in about two thirds of all local markets, led by the Fraser Valley, Victoria, Edmonton, Montreal and Quebec City.
The national sales to new listings ratio edged up to 64.8%, the ratio’s tightest reading since October 2009. A sales to new listings ratio between 40% and 60% is generally consistent with balanced housing market conditions, with readings below and above this range indicating buyers’ and sellers’ markets respectively.
The ratio was above 60% in about half of all local housing markets in May, virtually all of which are located in British Columbia, in addition to housing markets in and around Toronto and across Southwestern Ontario.
The number of months of inventory is another important measure of the balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.
There were 4.7 months of inventory on a national basis at the end of May 2016, which is unchanged from April’s reading and the lowest level in more than six years. Months of inventory have been trending lower since early 2015, reflecting increasingly tighter housing markets in BC and Ontario.