Canada Existing Home Sales Drop 1.7% in April From March -- Update

By Paul Vieira

OTTAWA--Canada's existing-home sales fell in April, and the number of properties available for sale reached their highest level since the onset of the Covid-19 pandemic.

House prices also fell on a one-year basis in April, which marks the start of the historically busy spring home buying-and-selling season. The data suggest the spring session is off to a damp start, as interest rates remain elevated and it's unclear when and how deeply the Bank of Canada might cut rates.

National home sales declined 1.7% in April from the previous month, the Canadian Real Estate Association said Wednesday. On an unadjusted basis, transactions in April were more than 10% higher than year-ago levels.

The real-estate data indicated that benchmark house prices, calculated in a similar fashion to the S&P CoreLogic Case-Shiller National Home Price Index, were unchanged in April from March, but down 0.9% from a year ago or an unadjusted basis - or the first such year-over-year drop since last June. On a seasonally adjusted basis, benchmark house prices fell 0.6%.

Overall, the benchmark price of a house in Canada sits at 719,400 Canadian dollars, or the equivalent of about $526,000, and that is nearly 40% higher than five years ago.

The association said there was roughly 4.2 months of housing inventory available on the market at the end of April 2024, which is up from 3.9 months at the end of March and the highest level since the onset of the pandemic. Data from local real-estate boards, in particular Toronto and Vancouver, had indicated some big increases in listings, especially for condominium units.

There are "a healthier number of properties to choose from but less enthusiasm on the demand side," said Shaun Cathcart, economist at the real-estate association.

Some real-estate agents and mortgage brokers attributed the increase in listings to real-estate investors starting to head for the exits, due to, among other things, mortgages renewing at higher rates, the pending increase in Canada's capital-gains tax, and a push by lawmakers to crack down on short-term rentals via services like Airbnb.

On a seasonally adjusted basis, new listings rose 2.8% in April from March. On an unadjusted basis, listings surged nearly 35% from a year ago.

The share of after-tax income required to afford a house remains near a 40-year high, according to Bank of Canada data. Stretched affordability is due to a shortage of housing units, and a rapidly growing population, due to immigration. National Bank Financial, after reviewing labor-market data, said Canada's population has increased by 410,000 in the first four months of 2024, or 47% higher than growth in the comparable year-ago period.

"Housing affordability problems could worsen over the next few quarters, as we head for another record year of population growth," the firm's chief economist, Stéfane Marion, said.

Write to Paul Vieira at [e-mail]

(END) Dow Jones Newswires

05-15-24 1008ET