Real Estate Sales Drop Hard Across Country

Published January 22, 2019 by Real Estate Leads

Your take on the recent trend of cooling Canadian real estate sales will depend on who you are in the real estate market. If you’re an owner or an investor with funds in real estate, you likely won’t see it very favourably. Alternately, if you’re a home buyer – and in particular a first-time homebuyer, the recent news that sales dropped to a new multi-year low last month to close out 2018 will be cautiously promising.

As a real estate agent, of course, any downturn in the market isn’t what you want to be hearing. Fewer sales equates to less business to go around for the ever-greater numbers of licensed realtors in the business. Situations like this make being able identify, impress, and retain prospective clients increasingly important for a realtor.

Here at Real Estate Leads, our online real estate lead generation system makes it so that you get more out of the first part of that equation, and capable realtors have a way of using the second part to ensure the third and establish long-term clients. The same type of clients who are likely to recommend you to others as well. It’s a positive all around.

But back to topic, what’s to be made of this trend that continues to see the real estate market in Canada cooling off so significantly?

Canadian Real Estate Sales Dip Like They Haven’t Since 2012

Canadian real estate sales indicated one of the worst Decembers in years. A mere 21,909 sales went through the MLS nationwide for December, and this was down 34.24% compared to the month before. This is a 19% decline compared to the same month last year, and sales for the month have only been lower a pair of time over the past 10 years; 2012 and 2008.

The December numbers and annual growth rates were worth noting. Monthly declines are always seen in December, but this one was the biggest since 2007. What’s more, the annual decline is the third consecutive one to occur here, and the most pronounced one since March 2018. Since February of 2016, the annual growth rate has been trending lower.

Dec. ’18: Only a Single Major Canadian Real Estate Market Grew

The observed market declines were consistent across the board, but a few markets did better than others. Montreal came in at 2,825 sales for December, which was a 2.5% increase compared to the same month 2017. Ottawa had 677 sales, a 12.9% decrease from the previous December. Winnipeg’s number was 495, and also down 14.4% from the same time last year. Facts are facts, and only one major market with more than 500 sales last year grew over the course of 2018.

Scenario for Canada’s Bigger Urban Centres

We’ll start with Toronto and Calgary here. Toronto reported 3,781 sales in December, a big decline of 23.3% compared to December last year. Calgary reported 985 sales, a similar biggie at 24.2% down from one year ago. The CREA defines both those declines as middle of the market, however, and relatively speaking.

Of course, market restrictions in both Toronto and Vancouver can been credited with a large portion of the sales declines seen in Canada’s 2 biggest metropolitan areas. Mortgage stress testing has been a big factor as well, and should continue to be this year as well while the new definition of a ‘quality buyer’ is still a work in progress.

The risk of course is looking at those factors in a vacuum, but it’s safe to say that a broader weakness is being observed across the country. The fact that markets not subject to a foreign buyer tax are also seeing weakness in sales supports this understanding.

There are some that suggest that more Nationally-focused mortgage stress tests would be a good idea, but industry insiders counter that by saying that most markets with declines do not have home prices detached from local incomes (which is the explicit scenario in Vancouver and Toronto). That doesn’t mean prices are fair value, but it does indicate that the stress test has had minimal impacts.

It remains the way it’s always been in that a typical family in most cities can afford a typical home. The consensus seems to be that it’s primarily households that would be buying ‘beyond their means’ are the ones being impacted by the restrictions – and for many of them they might actually be glad for the wake-up call! In conclusion, though, and when we look at this objectively we can see that the impact of rising interest rates, and a contraction in general credit applications are behind the market dips. This happens nearly every time interest rates rise, and they are always moving in one direction or another.

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