Statistics released today by the Canadian Real Estate Association (CREA) show that the slowdown that began in March in response to higher interest rates continued in July, albeit at a slower pace. Home sales recorded over Canadian MLS® Systems fell by 5.3% between June and July 2022. The pace of home sales last month was well below its 10-year moving average as buyers and sellers moved to the sidelines in response to rising mortgage rates and a reassessment of the outlook. While this was the fifth consecutive month-over-month decline in housing activity, it was also the smallest of the five.Sales were down in about three-quarters of all local markets, led by the Greater Toronto Area (GTA), Greater Vancouver, Fraser Valley, Calgary and Edmonton.

The actual (not seasonally adjusted) number of transactions in July 2022 came in 29.3% below that same month last year.

Housing market analysts at the Canadian banks continued to revise their home price forecasts over the next year. Royal Bank, TD, Desjardin and BMO all project that Canadian benchmark prices will fall roughly 20%-to-25% from their February peak by the end of 2023. Of course, this will vary from region to region. The hardest hit has been the geographies where prices surged the most, especially in the Greater Golden Horseshoe in Ontario and, to a lesser extent, in BC.

However, even if these forecasts prove to be correct, home prices in most regions will remain well above the levels posted before the pandemic began in early 2020. Housing in Canada’s largest cities will remain unaffordable for median-income households.

New ListingsThe number of newly listed homes fell back by 5.3% month-over-month in July. The decline in new supply was broad-based, with listings decreasing in about three-quarters of local markets, including most significant markets.With sales and new listings down by 5.3% in July, the sales-to-new listings ratio remained unchanged at 51.7% – slightly below the long-term average for the national sales-to-new listings ratio of 55.1%.

There were 3.4 months of inventory on a national basis at the end of July 2022, still historically low but up quite a bit from the all-time low of 1.7 months set at the beginning of 2022.

Home PricesThe Aggregate Composite MLS® Home Price Index (HPI) edged down 1.7% month-over-month in July 2022. This was similar but less than the 1.9% decline in June.

Regionally, most of the monthly declines in recent months have been in markets across Ontario and, to a lesser extent, in British Columbia.

Prices continue to be more or less flat across the Prairies while only now showing minor signs of dipping in Quebec. On the East Coast, prices continue to rise at a much slower pace. The exception is relatively more expensive Halifax-Dartmouth, where prices have dipped slightly.

The non-seasonally adjusted Aggregate Composite MLS® HPI was still up by 10.9% on a year-over-year basis in July. However, those year-over-year comparisons have been winding down quickly from the near-30% record year-over-year increases logged in January and February.