In May, home sales in Canada rose by 5.1% compared to the previous month. This increase in sales activity was complemented by a 1.4% rise in actual (not seasonally adjusted) monthly activity compared to May 2022, according to the latest data released by the Canadian Real Estate Association (CREA).
Although the number of newly listed properties increased by 6.8% month-over-month, the supply of homes for sale still remains historically low.
The MLS Home Price Index (HPI) demonstrated a 2.1% month-over-month increase, signaling a positive trend in housing prices. However, when compared to the previous year, the HPI was down by 8.6%.
Furthermore, the actual (not seasonally adjusted) national average sale price in May experienced a 3.2% year-over-year increase. This growth is significant, as it marks the first year-over-year gain in the average home price in 12 months.
The report also highlighted that home sales recorded over Canadian MLS Systems increased by 5.1% between April and May 2023. This upward trend was observed in approximately 70% of all local markets, including major cities such as the Greater Toronto Area (GTA), Montreal, Greater Vancouver, Calgary, Edmonton, and Ottawa.
Larry Cerqua, Chair of CREA, acknowledged the rebound in sales activity and the positive shift in home prices. However, he emphasized that the recovery's sustainability will depend on the supply of homes, which currently remains limited.
Shaun Cathcart, CREA's Senior Economist, highlighted the puzzle of existing homeowners' reluctance to list their properties due to their desire to maintain low fixed mortgage rates obtained during the COVID-19 pandemic. This phenomenon could lead to a more pronounced impact on housing prices due to limited supply.
The market's supply-demand dynamics were evident in the number of newly listed homes, which rose by 6.8% in May but still remained at historically low levels.
The sales-to-new listings ratio, which measures the relationship between sales and new listings, remained steady at 67.9% in May, only slightly lower than April's ratio of 69%. The long-term average for this ratio is 55.1%.
The inventory of homes stood at 3.1 months at the end of May 2023, a decrease from 3.3 months in April. This decline indicates a decrease in the available housing supply and is more than a full month lower than the recent peak in January. The long-term average for this measure is approximately five months.
The Aggregate Composite MLS Home Price Index (HPI) demonstrated a significant increase of 2.1% on a month-over-month basis in May 2023. This substantial gain followed a similar increase observed in April. The rise in prices was widespread across many local markets.
Although the Aggregate Composite MLS HPI is still 8.6% below year-ago levels, it indicates a smaller decline compared to previous months.
The actual (not seasonally adjusted) national average home price in May 2023 was $729,000, marking a 3.2% increase from May 2022. This positive year-over-year gain is the first observed in 12 months. The recovery in the national average price can be attributed largely to significant sales rebounds in the GTA and B.C. Lower Mainland. However, when excluding these regions from the calculation, the national average price decreases by almost $150,000.
