RBC: May was a turning point for home sales in multiple markets

Central bank's outsized rate increases having a big impact, analyst says.

Multiple major Canadian markets saw significant pullbacks in home sales activity in May, indicating a major shift in the national housing market, according to Robert Hogue of RBC Economics.

In a new analysis, Hogue said that the slowdown was especially apparent last month in Toronto, Vancouver, Montreal, Ottawa, and Hamilton.

“For many of them, [May] represented the third-straight month of decline. Clearly the Bank of Canada’s interest rate hikes since March – and the prospects for more in the months ahead – are changing the game in a big way. They’re considerably raising the bar for buyers, and dragging down earlier (super) bullish sentiment in the process,” Hogue explained.

The near future should prove to be an interesting time for these markets.

“We expect further reversal of the massive pandemic-era gains in these and other markets in the period ahead. Interest rate hikes [are] straining affordability and weighing on property values, especially in expensive markets,” Hogue said.

The accompanying rise in inventories, particularly in Toronto and Montreal, is helping ease the extreme conditions that characterized demand-supply dynamics just a few months back, Hogue added.

“In fact, most major markets in Canada have returned to balanced territory in May based on sales and new listings reported by local real estate boards.”

MBN

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