Canadian Housing Market Gets Reality Check with Drop in Sales

(Bloomberg) — Canadian home sales dropped for the first time since April, as the real estate rush of recent months wanes.

National homes sales declined 0.7% in October from a month earlier, the Canadian Real Estate Association reported Monday. Benchmark prices rose 1% from September, bringing the gain since April to 7%.

Canada’s housing market boomed over the summer on record-low interest rates and a surge in demand for more spacious accommodation amid the Covid-19 pandemic, pushing prices and sales to record highs. But recent data suggest real estate is cooling, as more properties become available in some of the country’s largest cities.

graphical user interface, chart: Canadian home sales cool off as pent-up demand from lockdowns wanes

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Canadian home sales cool off as pent-up demand from lockdowns wanes

“The level of activity seen in the summer months was unsustainable and reflected aggressive utilization of pent-up demand,” Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce, said by email. “Now it’s back to reality for housing, and growth from here will be more consistent with overall economic growth. Therefore look for additional softening in activity during the winter.”

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New listings climbed 2.9% in October. The overall gain in supply was driven by listings in the Toronto area, the lower mainland of British Columbia and Ottawa, CREA said. The national sales to new listing ratio was 74.3%, still well above the long-term average of 54.1%.

Still, conditions are tight. There were just 2.5 months of inventory nationwide, CREA said, the lowest on record.

(Updates with chart, economist quote)

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