Has the Canadian real estate market experienced demand exhaustion?

As more homes are priced out of reach of the average buyer, whether it is in Toronto or Halifax, some young families have become moved to the sidelines with hopes that a cooler market – and their opportunity to buy – is just around the corner. There is evidence of this in the latest numbers reported by the Canadian Real Estate Association (CREA).

According to CREA, national home sales tumbled 8.4 per cent month-over-month in June, while prices advanced 0.9 per cent. This represents the third consecutive monthly sales decline after surging to a record high in March. Housing sales moderated in about 80 per cent of all local markets, including almost all of Canada’s major urban centres.

Additional CREA figures also point to an interesting trend: the Canadian real estate market is witnessing buyers dropping out of the marketplace at a faster pace than sellers. The latest sales to new listing ratio (SNLR) was 69.2 per cent in June – the lowest reading since last August. The long-term average for the national sales-to-new listings ratio is 54.6 per cent, so June figures remain historically high; however CREA noted that the measure has been steadily moderating since reaching a peak of 90.8 per cent in January. Anything above the 60-per-cent threshold is considered a seller’s market.

Shaun Cathcart, CREA’s Senior Economist, says that “the frenzy and emotion” of the housing market in the early days of the COVID-19 public health crisis has finally subsided.

But where is this happening? Let’s examine the demand levels in several local Canadian housing markets.

These Canadian Real Estate Markets See Easing Buyer Demand

Is the Canadian real estate market on the road to balance? It might not happen overnight, but many industry experts are confident that it is a case of slow and steady wins the race. From British Columbia to Nova Scotia, many cities are beginning to see slower buying activity, which could eventually result in softening prices at some point in the future.

Here are some of the notable SNLR figures as of May 2021 (source: CREA, Better Dwelling):

Halifax, Nova Scotia

  • May 2021: 105.1 per cent
  • April 2021: 99.9 per cent

Thunder Bay, Ontario

  • May 2021: 101.6 per cent
  • April 2021: 106.6 per cent

Sudbury, Ontario

  • May 2021: 91.8 per cent
  • April 2021: 85.2 per cent

Saguenay, Quebec

  • May 2021: 81.9 per cent
  • April 2021: 113 per cent

Winnipeg, Manitoba

  • May 2021: 81.2 per cent
  • April 2021: 95.3 per cent

Trois Rivieres, Quebec

  • May 2021: 74.7 per cent
  • April 2021: 92.2 per cent

Toronto, Ontario

  • May 2021: 67.8 per cent
  • April 2021: 68 per cent

Vancouver, British Columbia

  • May 2021: 61.4 per cent
  • April 2021: 69.9 per cent

Should softening demand for detached and semi-detached homes, due to their sky-high price tags, lead to improving affordability in some local markets? It should be noted that the housing boom has potentially reached a zenith as they have tumbled, stagnated, or edged up slightly since hitting record highs in March.

Will Canadian Real Estate Prices Fall with Slowing Demand?

The price of the average Canadian home sold in June was $679,000. This is up 25 per cent year-over-year. But after reaching $716,000 in March, prices have fallen consistently every month: $688,000 in May and $696,000 in April. Home sales tumbled by 12 per cent in April, by seven per cent in May, and then by eight per cent in June.

Here is how provincial real estate prices have performed since March 2021 (source: CREA, Better Dwelling):

  • New Brunswick: -5.8 per cent
  • Alberta: -2.6 per cent
  • Ontario: -2.2 per cent
  • Saskatchewan: -0.6 per cent
  • British Columbia: -0.1 per cent
  • Prince Edward Island: +0.5 per cent
  • Quebec: +1.2 per cent
  • Manitoba: +1.8 per cent
  • Nova Scotia: +2.6 per cent
  • Yukon: +7.1 per cent
  • Northwest Territories: +8.5 per cent
  • Newfoundland and Labrador: +9.3 per cent

“While there is still a lot of activity in many housing markets across Canada, things have noticeably calmed down in the last few months,” CREA chair Cliff Stevenson said in a news release. “There remains a shortage of supply in many parts of the country, but at least there isn’t the same level of competition among buyers we were seeing a few months ago.”

Up or Down – Which Way Will Canadian Real Estate Go?

CIBC says that a cooler housing market will not hurt Canada’s economic recovery. With interest rates expected to stay low until some time next year, other experts concede that the housing boom still has some legs. Canada’s luxury real estate market is surging, the rental market is heating up again, and some unique trends are popping up in the marketplace, including zero-down mortgages. Indeed, so much is happening that it is challenging to accurately time when the market will go through a correction or an immense downturn.