In May, the housing market in Canada experienced an increase in both activity and sales. However, the number of new listings remained at historically low levels, according to the Canadian Real Estate Association (CREA). The data revealed a 6.8% rise in newly listed properties, which was matched by a similar increase in sales. Consequently, the sales-to-new listings ratio for the month remained relatively unchanged at 67.9%. Although slightly lower than April’s 69%, this ratio still exceeded the long-term average of 55.1%.

Throughout the year, the national supply of available inventory continued to decrease. In May, there were 3.1 months of inventory, down from 3.3 months in April, and a decline of more than a month since January.

Shaun Cathcart, the senior economist at CREA, attributed the reluctance of homeowners to list their properties to the influence of interest rates. Many homeowners had secured fixed-rate mortgages during the height of the COVID-19 pandemic when interest rates were at historically low levels. Moving now would necessitate breaking that arrangement and entering into a new mortgage at significantly higher rates. Cathcart emphasized that owners would likely prefer to remain in their current mortgages until the fixed rate expires, as it would be disadvantageous to renegotiate in the current high-rate environment.

At the onset of the pandemic, interest rates dramatically decreased due to the economic impact of business closures, emergency public health measures, and disruptions in supply chains.

The scarcity of housing inventory is expected to affect home prices in Canada. Cathcart suggested that the existing supply-demand imbalance could lead to a further rebound in prices in 2023. The lack of inventory may have inflated the appearance of the market’s recovery, making it seem stronger than it actually is. Although not a substantial recovery, the market has shown growth with the MLS home price index increasing by 2% in both April and May. The limited supply has resulted in high demand, with multiple buyers competing for each available listing.

Cathcart highlighted the difference between the current market and the boom experienced in 2020/2021 during the pandemic. The previous market was primarily driven by existing homeowners engaging in buying and selling, creating activity in both sales and new listings. However, the current market is characterized by existing homeowners who are less active due to the attractive mortgage rates they currently hold. As a result, new listings remain low, and the market is seeing more first-time buyers reentering the market due to relative factors such as increased rental costs. Cathcart described the current market situation as something different, unlike anything previously observed.

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