Housing market slowdown continues, with average selling price down 13% since February

Canada's housing market continued to cool down from its red-hot pandemic pace in May, with the average price of a Canadian home that sold during the month going for $711,000, a decline of more than $100,000 in the past three months.

Sales volume now down to where it was before the COVID-19 pandemic

A home for sale in Toronto is shown. Canada's housing market has been on fire for much of the pandemic, before cooling down significantly once lending rates started to go up a few months ago. (Esteban Cuevas/CBC)

Canada's housing market continued to cool down from its red-hot pandemic pace in May, with the average price of a Canadian home that sold during the month going for $711,000, a decline of more than $100,000 in the past three months.

While May is typically a strong month for home sales, the Canadian Real Estate Association (CREA) said Wednesday that the volume of homes that sold fell precipitously during the month, down by 20 per cent compared with the same period a year ago.

The slowdown means that home sales are now finally back to the level they were at before the COVID-19 pandemic, the realtor group said.

After cooling down in March and April 2020 as the pandemic was unfolding, Canada's housing market has rebounded strongly, with selling prices and sales volumes setting record high after record high for much of the past two years.

But that momentum has shifted noticeably in recent months, as lending rates that were slashed early in the pandemic start to rise, making mortgages more expensive and reducing buyers' purchasing power.

CREA says the average price of a home that sold on its Multiple Listing Service last month went for $711,000. That's down by more than 13 per cent from the all-time high of $816,720 set back in February 2022.

"Ultimately this has been expected and forecast for some time — a slowdown to more normal levels of sales activity and a flattening out of prices," CREA's chief economist, Shaun Cathcart, said in a news release.

CREA says the average price figure can be misleading because it is easily skewed by sales in large expensive markets such as Toronto and Vancouver. So it calculates another number, known as the House Price Index (HPI), which it says is a better gauge of the market because it adjusts for the volume and types of housing.

The HPI edged down by 0.8 per cent in the month, CREA says, following a 1.1 per cent decrease in April. But it is still more than 19 per cent higher than it was last year, mostly because of the eye-popping gains seen in late 2021.

The same can be said of the average price figure, which is still 3.4 per cent higher than it was a year ago, despite three monthly declines in a row.

Different trends across the country

If Toronto and Vancouver are stripped out of the numbers, the average price of a Canadian home that sold in May was $588,500.

The biggest factor driving the national number lower is Ontario, where most markets are seeing significant price declines. Rishi Sondhi, an economist with TD Bank, said there's an interesting regional story playing out beneath the picture of the national market.

"Sales and prices are down disproportionately in Ontario and British Columbia, which suffered severe affordability deterioration during the pandemic," he said, noting that the numbers in the Greater Toronto Area look especially bleak — and that's the part of the country that saw the biggest run-up in prices earlier due largely to investors piling into a rising market.

"It's also likely the case that some GTA buyers purchased their homes before selling their old ones [thinking the market would remain hot] and are now being forced to accept lower prices to complete their transactions. We would, however, expect this dynamic to run its course in relatively short order," Sondhi said.

Suburbs hit hardest

Cailey Heaps, president and CEO of Toronto-based real estate firm Heaps Estrin, says the slowdown in Toronto is mostly happening in the suburbs, where prices jumped the most during the pandemic as buyers sought more space. Now, the market is regressing to the mean.

"Real estate markets have not been performing normally for a few years now, so any change is going to feel like a massive change, but it is really just a shift to a more balanced market," she said in an interview.

The house price index for the Greater Toronto Area has fallen by 2.5 per cent in the past three months, but is still up by 24 per cent compared to where it was a year ago, and up by 62 per cent compared to where it was three years ago, before the pandemic, CREA says.

While Heaps expects higher mortgage rates to drag down prices for the rest of the year and cause pain for owners who paid a premium when things were hot, ultimately she thinks the market will remain strong due to lack of supply and the ongoing influx of immigrants looking for housing.

"People who are going to be disposing of properties now are people who didn't forecast the change in interest rates and they just can't carry their properties," she said.

Wesley Favro owned a condo in Kelowna, B.C., up until 2020, when he and his partner sold it, hoping to move up to something bigger. But prices quickly escalated beyond their budget, so they're now renting and waiting for an opportunity to buy. (Tom Popyk/CBC)

Another market that saw red hot gains earlier in the pandemic that are winding down now is B.C., where prices outside Victoria and Vancouver are cooling. That could be good news for prospective buyers like Wesley Favro, who had a condo in Kelowna until 2020, when he and his partner sold it, hoping to move up into something larger. But that's when prices took off in B.C.'s Interior, leaving the couple behind — despite having two good incomes.

"It feels like we can't really get ahead and that we're sort of just spinning our wheels in the current environment," Favro told CBC News in an interview. He says they've looked at numerous properties in the past two years, but every time they contemplated putting in an offer, the home would sell in a bidding war with more than a dozen buyers.

"There was nothing really that we could afford within our price range that was also going to be a good fit for our lifestyle," Favro said, adding that he hopes the market may slow down enough for him to put down the roots they want in the community they love.

"It seems like we missed the mark and, honestly, we'd really like to stay here. We love the community ... but it feels like we can't stay."


Pete Evans

Senior Business Writer

Pete Evans is the senior business writer for Prior to coming to the CBC, his work has appeared in the Globe & Mail, the Financial Post, the Toronto Star, and Canadian Business Magazine. Twitter: @p_evans Email:

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