Real-estate activity in Canada experienced another month of weakness, as sales of existing homes fell for the third consecutive month. According to the Canadian Real Estate Association (CREA), existing home sales dropped by 1.9% in September, although the decline was less severe compared to August. On a nonadjusted basis, transactions in September were 1.9% higher than the same period last year.

The decrease in September coincided with a significant increase in newly listed properties, which saw a 6.3% surge from August.

The real-estate data also revealed that benchmark house prices, calculated similarly to the S&P CoreLogic Case-Shiller National Home Price Index, experienced a slight decline of 0.3% in September compared to the previous month. This downward trend was solely driven by changes in Ontario's real-estate market, as prices continued to rise in other provinces.

Despite this decline, house prices are still up by 1.1% compared to one year ago. The association noted that while prices have generally stabilized in recent months, the year-over-year comparisons are likely to show slight increases in the upcoming months when compared to the declines seen in the second half of last year. The actual, not seasonally adjusted, average home price stands at 655,507 Canadian dollars, equivalent to approximately $478,717 USD.

Canada's Housing Market Shows Signs of Softening

After experiencing a rebound earlier this year, Canada's housing market has recently displayed indications of softening. This can be attributed to the impact of higher interest rates over the past 18 months and persistent inflation. In response to these factors, the Bank of Canada maintained its benchmark policy rate of 5% in the previous month. This rate has remained at a 22-year high after consecutive quarter-point increases in June and July.

According to Shaun Cathcart, senior economist at CREA, the resale housing markets have swiftly settled down following a brief and somewhat surprising revival in sales and prices during spring. However, Cathcart emphasizes that the future course of the housing market will greatly depend on interest rates. Canadian residents can anticipate a calmer winter period, with all eyes focused on the Bank of Canada, which is scheduled to make its next interest rate decision on October 25th.

While the demand for housing in Canada remains high, the supply of available homes continues to present a challenge. However, there has been a recent increase in new listings, with a rise of approximately 35% from the lowest point in March. Despite this, the sales-to-new listings ratio decreased from 55.7% to 51.4% in September, falling below the long-term average of 55.2%, which has been consistent since January.

Written by Robb M. Stewart

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