The market has essentially entered bear territory, the chief economist says
The Canadian housing sector must brace for more turbulent waters ahead, building on the significant deceleration seen over the past few months, according to BMO chief economist Doug Porter.
Recent figures show that despite some positive developments, the Canadian housing market has essentially entered bear territory, Porter warned.
“The inventory of unsold homes has risen to 3.4 months (seasonally adjusted) from an incredibly skinny 1.7 at the start of the year,” he said. “That’s getting back close to the much calmer conditions prevailing just before the pandemic when they were a bit above four months’ supply.”
“A metric that’s a bit more concerning for the near term outlook is the ratio of sales to new listings, which has plunged to just above the 50 level after holding well above a record high 75 for all of 2021. In Ontario, that ratio has dropped to barely above 40, a level it has seen only once in the past 25 years (in the depths of the 2008/09 downturn).”
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The decline was most apparent in sales prices. The latest data from the Canadian Real Estate Association showed that the actual (non-seasonally adjusted) national average home sales price was $629,971 in July, representing a 5% year-over-year drop.
“Prices have famously started to drop in many Ontario cities in recent months, including the GTA, but they’re still up a tad from a year ago,” Porter said. “This ratio says there is more weakness coming, and soon.”
