Canadian Home Sales Decline Month-Over-Month and Year-Over-Year in April

According to statistics released on Monday (5-16-22) by the Canadian Real Estate Association (CREA), home sales recorded over Canadian MLS® Systems declined -12.6% between March and April 2022. CREA is reporting that monthly activity was at its lowest level since the summer of 2020. The Aggregate Composite MLS® Home Price Index (HPI) edged down -0.6% on a month-over-month basis in April 2022—the first month-over-month decline since April 2020.

The actual (not seasonally adjusted) number of transactions in April of 2022 came in -25.7% below April of 2021. That said, as has been the case since last summer, it was still the third-highest April sales figure ever, trailing only April of 2021 and April of 2016.

The number of newly listed homes edged back by -2.2% on a month-over-month basis in April. The small monthly decline was the result of a fairly even split between markets where listings rose and those where they fell. Notable declines were seen in the Lower Mainland and Calgary, while listings jumped higher in Victoria and Edmonton.

With sales falling by quite a bit more than new listings in April, the sales-to-new listings ratio eased back to 66.5%—its lowest level since June 2020. This reading is right on the border between what would constitute a seller’s and a balanced market. The long-term average for the national sales-to-new listings ratio is 55.2%.

There were 2.2 months of inventory on a national basis at the end of April 2022, still historically very low but up from slightly lower readings in the previous eight months. The long-term average for this measure is a little over 5 months.

In a statement prepared to accompany the April Canadian Home Sales report, Shaun Cathcart, CREA’s Senior Economist, said:

“After 12 years of ‘higher interest rates are just around the corner’ here they are. But it’s less about what the Bank of Canada has done so far. It’s about a pretty steep pace of continued tightening that markets expect to play out over the balance of the year, because that is already being factored into fixed mortgage rates.

Of course, those have, for that very reason, been on the rise since the beginning of 2021, so why the big market reaction only now? It’s likely because typical discounted 5-year fixed rates have, in the space of a month, gone from the low 3% range to the low 4% range. The stress test is the higher of 5.25% or the contract rate plus 2%. For fixed borrowers, the stress test has just moved from 5.25% to the low 6% range—close to a 1% increase in a month! It won’t take much more movement by the Bank of Canada for this to start to affect the variable space as well.”