May Home Sales and Prices Show Positive Year-Over-Year Growth as Canadian Real Estate Market Heats Up

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The Canadian real estate market displayed signs of a significant rebound in May, with home sales posting their first year-over-year increase since June 2021 and average prices experiencing a positive year-over-year gain for the first time in a year. These findings, released by the Canadian Real Estate Association (CREA), indicate a notable shift away from the sluggish sales and declining prices that characterized the market the previous year.

A Promising Rebound: The CREA reported that the number of home sales in May reached 54,241, reflecting a 1.4% increase compared to the same period last year. Furthermore, seasonally adjusted sales for May stood at 40,220, showing a 5.1% rise compared to April. This surge in sales comes after a prolonged period of prospective buyers cautiously awaiting a stabilization in home prices. However, as buyers hesitated, the Bank of Canada increased interest rates, resulting in higher mortgage rates. The central bank continued its rate hikes this month to address inflation concerns.

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Growing Confidence and Market Activity: Recent months have witnessed a notable increase in both buyers and sellers entering the real estate market. Consumer confidence has experienced a sharp rise since March, as observed by Sherry Cooper, chief economist of Dominion Lending Centers. However, with household debt-to-income levels at near-record highs, sensitivity to interest rates remains a critical factor influencing market dynamics.

Positive Price Movements: Alongside increased sales, average home prices have also shown an upward trend. According to CREA’s report, the actual national average home price in May was $729,044, which represents a 3.2% increase from May 2022. The seasonally adjusted average home price reached $715,290, reflecting a 2.7% rise from April. These price increases provide further evidence of a market rebound; however, the low supply of available properties remains a significant factor that may impact the recovery’s extent.

Supply Constraints and Listings: While the market is witnessing positive developments in sales and prices, the supply of properties remains limited. In May, the number of newly listed properties rose by 6.8% to a total of 59,237 compared to April. However, the actual number of new listings, totaling 87,037, remained 13.6% lower than May 2022. Robert Kavcic, senior economist with BMO Capital Markets, noted that although new listings are showing signs of improvement, they are still approximately 16% below the pre-COVID average.

Growing Confidence and Market Activity: Recent months have witnessed a notable increase in both buyers and sellers entering the real estate market. Consumer confidence has experienced a sharp rise since March, as observed by Sherry Cooper, chief economist of Dominion Lending Centers. However, with household debt-to-income levels at near-record highs, sensitivity to interest rates remains a critical factor influencing market dynamics.

Positive Price Movements: Alongside increased sales, average home prices have also shown an upward trend. According to CREA’s report, the actual national average home price in May was $729,044, which represents a 3.2% increase from May 2022. The seasonally adjusted average home price reached $715,290, reflecting a 2.7% rise from April. These price increases provide further evidence of a market rebound; however, the low supply of available properties remains a significant factor that may impact the recovery’s extent.

Supply Constraints and Listings: While the market is witnessing positive developments in sales and prices, the supply of properties remains limited. In May, the number of newly listed properties rose by 6.8% to a total of 59,237 compared to April. However, the actual number of new listings, totaling 87,037, remained 13.6% lower than May 2022. Robert Kavcic, senior economist with BMO Capital Markets, noted that although new listings are showing signs of improvement, they are still approximately 16% below the pre-COVID average.

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