Introduction:
The Canadian Real Estate Association (CREA) has revealed that home sales in January reached the lowest level for the month since 2009, declining by 37.1 percent compared to the previous year. The drop-in sales were also evident on a month-over-month basis, with a three percent decrease compared to December. The reduced activity in the housing market offset the small gains observed in December. This article examines the factors contributing to the decline in home sales and the challenges faced by buyers in the current market.
Key Details:
Decreased Sales Performance:
In January, home sales in Canada experienced a significant decline, reaching the lowest level for the month since 2009. Compared to the same period the previous year, sales were down by 37.1 percent.
Additionally, January sales decreased by three percent when compared to December, further contributing to the overall decline in market activity.
Regional Variation:
The decline in home sales varied across regions. While Hamilton-Burlington, Ontario, and Quebec City experienced gains, they were outweighed by lower sales in Greater Vancouver, Victoria, Vancouver Island, Calgary, Edmonton, and Montreal. These regional variations played a role in the overall decrease in national home sales.
Reduced Inventory and Seller Behavior:
Buyers faced challenges due to limited inventory in the market. Sellers, particularly in Greater Toronto Area suburbs like Mississauga and Ajax, adopted a “wait-and-watch” approach, hoping to sell their properties at prices similar to those achieved the previous year. This cautious seller behavior contributed to fewer options for buyers, intensifying the inventory shortage.
Historic Low Listings:
Although there was a 3.3 percent increase in newly listed homes on a month-over-month basis in January, CREA noted that new supply remained historically low nationwide. In fact, the level of new listings in January was the lowest for that month since 2000. The lack of available listings further constrained buyer choices and contributed to the ongoing market challenges.
Market Correction and Price Outlook:
Economists believe that the housing market is still in correction mode, with activity levels reminiscent of the global financial crisis in 2008-2009, excluding the spring 2020 lockdown period. While sales may have reached a floor, price adjustments are expected to continue. RBC’s assistant chief economist suggests that the market may start to stabilize by summer, as it adjusts to higher interest rate.
Average Home Price:
The national average home price in January stood at $612,204, reflecting an 18.3 percent decline from January 2022. The downward trend in prices aligns with the overall market correction and subdued buyer activity.
Conclusion:
The Canadian housing market experienced a significant decline in home sales in January, reaching the lowest levels for the month since 2009. The limited inventory, cautious seller behavior, and regional variations contributed to the challenges faced by buyers. Economists anticipate further price adjustments as the market continues to correct, with stabilization expected in the coming months.
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