Canadian home sales drop for third straight month

By Staff | August 15, 2016 | Last updated on August 15, 2016
5 min read

The number of homes being sold via Canadian MLS Systems fell by 1.3% month-over-month in July 2016. And, with similar monthly declines having been posted in May and June, national sales activity in July came in 3.9% below the record set in April 2016.

Overall, home sales activity was down from the previous month in slightly more than half of all markets in July, led by Greater Vancouver and the Fraser Valley. Transactions in these two markets peaked in February of this year and have since dropped by 21.5% and 28.8%, respectively—much of the national sales decline in recent months reflects slowing activity in B.C.’s Lower Mainland.

But, “national sales and price trends continue to be heavily influenced by a handful of places in Ontario and British Columbia, masking significant variations in local housing market trends and conditions across Canada,” says CREA President Cliff Iverson.

Read: Don’t compare the booms in Toronto, Vancouver real estate

Gregory Klump, CREA’s Chief Economist, adds, “Home sales continued to trend lower, while price gains further accelerated in the lower mainland of British Columbia. This suggests sales are being reined in by a lack of inventory and a further deterioration in affordability.”

Plus, “the new 15% property transfer tax on Metro Vancouver home purchases by foreign buyers took effect on August 2nd, so it will take some time before the effect of the new tax on sales and prices can be observed. That said, the new tax will do little in the short term to increase the supply of homes.”


Home sales highlights:

  • National home sales fell 1.3% from June to July.
  • Actual (not seasonally adjusted) activity came in 2.9% below July 2015.
  • The number of newly listed homes rose 1.2% from June to July.
  • The MLS® Home Price Index (HPI) rose 14.3% year-over-year in July.
  • The national average sale price climbed 9.9% in July from one year ago; net of the Greater Toronto Area (GTA) and Greater Vancouver, it advanced 7% year-over-year.

More details

Actual (not seasonally adjusted) sales activity was down 2.9% year-over-year (year-over-year) in July 2016, marking the first year-over-year decline since January 2015 and the largest since April 2013.

In line with softening activity in the Lower Mainland, year-over-year increases have been losing momentum since February 2016. Sales were down from levels one year earlier in about 60% of all Canadian markets, led by Greater Vancouver, the Fraser Valley, Calgary and Edmonton.

The number of newly listed homes rose by 1.2% in July 2016 compared to June. While new supply climbed in fewer than half of all local markets, increases in Greater Vancouver and the Fraser Valley, Greater Toronto, Calgary and Edmonton outweighed declines in smaller markets.

Read: Pitfalls with the Principal Residence Exemption

With sales down and new listings up, the national sales-to-new listings ratio eased to 61.6% in July 2016 – its second monthly decline following its peak of 65.3% in May (a sales-to-new listings ratio between 40% and 60% is generally consistent with balanced housing market conditions).

The ratio was above 60% in about half of all local housing markets in July, virtually all of which continue to be located in British Columbia, in and around the Greater Toronto Area and across Southwestern Ontario.

The number of months of inventory is another important measure of the balance between housing supply and demand—it represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity.

For July, there were 4.6 months of inventory on a national basis at the end of July 2016. This is unchanged from readings in each of the previous two months and continues to indicate a tight balance between supply and demand for homes.

In fact, the number of months of inventory has trended lower since early 2015, reflecting increasingly tighter housing markets in B.C. and Ontario. It currently sits near or below two months in a number of local markets in British Columbia and in and around the GTA, with some regions in the GTA are down to just a couple of weeks of inventory.

Read: Housing crash? No problem for Canada’s banks, says Moody’s

Additional statistics

In July, the Aggregate Composite MLS Home Price Index rose by 14.3% year-over-year in July 2016, the biggest gain since November 2006. For the sixth consecutive month, year-over-year price growth accelerated for all Benchmark property types tracked by the index.

Two-storey single family home prices continued to post the biggest year-over-year gain (+15.9%), followed by townhouse/row units (+15.3%), one-storey single family homes (+14.3%), and apartment units (+11.1%).

Overall, while prices in 9 of the 11 markets tracked by the MLS HPI posted year-over-year gains in July, increases continue to vary widely among housing markets. For example, Greater Vancouver (+32.6%) and the Fraser Valley (+37.6%) posted the largest year-over-year gains by a wide margin, followed by Greater Toronto (+16.7%), Victoria (+17.5%) and Vancouver Island (+11.6%).

Read: Fed asks CMHC for ways to cool housing prices

By contrast, prices were down -4.2% and -1.5% year-over-year in Calgary and Saskatoon respectively.

Meanwhile, home prices rose modestly in Regina (+2.7% year-over-year), Greater Montreal (+1.8% year-over-year) and Ottawa (+1.1% year-over-year). Greater Moncton recorded its largest year-over-year home price increase (+8.4%) among an unbroken string of gains posted every month over the past year.

The national average price continues to be pulled upward by sales activity in Greater Vancouver and Greater Toronto, which remain two of Canada’s tightest, most active and expensive housing markets. The actual (not seasonally adjusted) national average price for homes sold in July 2016 was $480,743, up 9.9% year-over-year.

If these two housing markets are excluded from calculations, the average price is a more modest $365,033 and the gain is trimmed to 7% year-over-year.

Even then, this reflects a tug of war between strong average price gains in housing markets around the GTA and in British Columbia versus flat or declining average prices elsewhere in Canada. The average price for Canada net of sales in British Columbia and Ontario in July 2016 edged down 0.2% year-over-year to $310,905. The year-over-year percentage change in the national average price excluding B.C. and Ontario sales has now been in negative territory for 20 consecutive months.

Read: Paying down mortgages faster can save borrowers thousands staff


The staff of have been covering news for financial advisors since 1998.