According to the Durham Region Association of Realtors® housing transactions through their MLS® system were down 5.9% from April 2002 and 34.9% year over year with a reported 1025 transactions. Supply doubled from 0.7 months in March to 1.4 months of inventory in May.
DRAR President Meridith Kennedy stated, “Seemingly in response to increasing borrowing rates by the Bank of Canada, the market cooled slightly from April to May but only by 7%. May 2022 saw an average selling price for all units in Durham drop under the $1 Million mark to $995,668 which is not bad considering the overall Home Price Index and Composite Benchmark price for all home types in Durham reached $1,128,900 – a 37.63% increase just a few months ago. Prospective buyers are also relieved to see the selling price over asking price move closer to parity from earlier this year from 129% to 108%. It’s giving buyers a bit more breathing room while trying to negotiate.”
As for benchmark pricing, single family homes were $1,205,900 which is a year over year increase of 28.5%. Townhouse/row units experienced an even greater increase of 30.42% at $790,000 and the benchmark for apartments was $703,000, up 35.76% from a year ago.
“The Durham Region Association of REALTORS® congratulates our new Provincial Government and looks forward to meeting with our new and re-elected MPP’s in the weeks to come.” Said DRAR CEO Wendy Giroux “Many commitments were made with respect to housing policy and development and we will continue to advocate to ensure those promises are acted on as swiftly as possible.”
According to CREA, national home sales fell by 8.6% on a month-over-month basis in May. The number of newly listed properties went up 4.5% month-over-month. The MLS® Home Price Index (HPI) edged down 0.8% month-over-month but was still up 19.8% year-over-year.
Meanwhile, Bank of Canada Govenor Tiff Macklem has stated that recent gains in home prices are not sustainable and warned households from taking on too much mortgage debt because interest rates will eventually rise. And in the U.S. the Federal Reserve raised interest rates 0.75%, which is the biggest increase since 1994. The collective expectation of the individual Federal Reserve members is that the benchmark rate will end the year at 3.4%, an upward revision of 1.5 percentage. Keep in mind that Canada tends to follow the U.S. lead. Also important is that pessimism is growing in terms of the economic growth outlook – whereas the view in March was for a GDP growth of 2.8%, the view as of mid-June was more like 1.7%. Some more pessimistic economists are predicting no growth at all. Lower growth is a counter-balance on the pressure to raise interest rates as higher interest rates are used as tool to cool inflation. However, there is also a view that we are headed to a 1970’s stagflation – a period of low growth with simultaneously high inflation.
According to this Globe and Mail article, part of the housing problem in Canada is that we’ve had the highest population growth of the G7 countries but the lowest per-capita stock of housing. Also concerning, is that investment in residential housing now accounts for roughly 42 percent of ALL in investment in the country! Looking back over the last two decades, this kind of investment percentage has only been seen in two other OECD countries – Greece and Ireland, both at the height of their housing bubbles. As the Globe and Mail correctly points out, this did not end well!
Another point of interest from the same Globe and Mail article is that investors have been the biggest buying segment in Ontario, accounting for approximately 25% of home purchases. This, coupled with the fact that this is the only segment to have accelerated their home purchases (in 2021) is another indication of a market peak. Remember too that when the market turns, investors are the first to go out the door! Sorry for the pun!
In Canada, housing prices have drastically outpaces income which is another factor indicating a market adjustment may be necessary.
This article from Global Property Guide explains the long boom in Canadian housing prices which has continued nearly unabated for the last 18 years. But if you look at a corresponding chart of interest rates, you might well see the correlation. See the chart below courtesy of TradingEconomics.com.