The State of Canada’s Housing Market: Recent Declines in Starts and Sales
The Canadian housing market is experiencing noticeable shifts, as evidenced by the latest reports from both the Canada Mortgage and Housing Corporation (CMHC) and the Canadian Real Estate Association (CREA). Recent data indicates a downtrend in housing starts and residential home sales, reflecting broader economic concerns, particularly regarding affordability and borrowing conditions.
Declining Housing Starts
In April 2024, the annual rate of housing starts in Canada dipped by 1%, decreasing from 242,267 in March to 240,229. This decline, while moderate, signals a softening in new construction across major urban centers including Toronto, Vancouver, and Montreal. CMHC’s chief economist, Bob Dugan, attributes this downturn to ongoing challenges in borrowing conditions that have affected multi-unit housing starts.
Trends in Urban Areas
Notably, construction in these urban centers is becoming more volatile. Dugan expressed that the fluctuations observed in markets like Toronto and Vancouver are reflective of the previous year’s stringent borrowing conditions. Multi-unit constructions, which typically include condos, have become more prevalent, yet they are also seeing a reduction in starts due to higher interest rates. Dugan emphasized that "we expect to see continued downward pressure in these large centres," signaling further challenges ahead for prospective homebuyers and renters alike.
The Timeframe for New Units
BMO’s chief economist Doug Porter pointed out a critical aspect regarding housing affordability: while multi-unit constructions are on the rise, their longer completion times mean that the influx of new inventory won’t alleviate current market pressures anytime soon. Affordable housing options remain sparse, leaving many prospective homeowners feeling the strain of high prices.
Residential Home Sales: A Neutral Position
Simultaneously, CREA has reported a decline of 1.7% in home sales from March to April 2024. Interestingly, this drop occurs within the context of a year-over-year increase, highlighting the complex nature of the market. RBC economist Rachel Battaglia noted that major markets are beginning to exhibit signs of softening, primarily due to rising prices and affordability concerns.
Insights from Alberta
Even Alberta, which had previously shown strong market activity, recorded a significant drop in sales. Battaglia suggested that the rapid appreciation of prices—especially in Calgary—may have deterred potential buyers. Many are reaching the limits of their financial capabilities, prompting a retreat from the market.
Seasonal Factors in Sales Data
Despite the decrease in monthly sales, April 2024’s compensation relative to April 2023 can largely be attributed to seasonal factors, particularly the Easter holiday. Extended business days in April may have contributed to higher sales figures compared to the previous year. However, the average sale price still experienced a slight decline, dropping by 1.8% and settling at $703,446.
Inventory and Market Dynamics
As the spring selling season unfolds, the number of homes for sale—known as inventory—has increased. CREA reported a notable 6.5% rise in the overall number of properties on the market, the highest level observed since just before the onset of the COVID-19 pandemic.
Despite this influx, the market remains largely stable in terms of pricing, with Battaglia explaining that "budget constrained buyers" seem to be at a standstill, waiting for more favorable conditions before re-entering the market.
Conclusion
In summary, the Canadian housing market is navigating a period of fluctuating dynamics. While there is a slight decline in housing starts and home sales, marked volatility in urban centers suggests persistent challenges ahead. High interest rates and affordability issues continue to weigh down potential buyers, creating a complex scenario where inventory is rising, but many buyers remain hesitant. As the market evolves, stakeholders will need to monitor these trends closely and assess how they influence housing affordability and availability in Canada.
