Toronto area\u2014Buyers extract price concessions in slow market<\/h2>\n
Last month was the quietest October in almost a quarter of a century. Home resales fell for a fifth-straight time, down 5% from September to the lowest point (4,867 units, seasonally adjusted) since October 2000. The picture of buyers in full retreat may be turning off potential sellers. After six consecutive increases, new listings dipped 2.9% m\/m in October. That didn\u2019t prevent demand-supply conditions from softening further, though. In fact, they became even more favourable to buyers who now hold the upper hand in price negotiations. And sure enough, buyers are wasting no time in exercising that power. Toronto\u2019s MLS HPI has dropped m\/m in the past three months. October\u2019s decline (-1.7%) was the deepest one of them. So far, the index has reversed just over 40% of the increase earlier this spring and summer. But there\u2019s likely more to come as buyers are poised to maintain their strong bargaining position while their budget remains heavily constrained by high interest rates and extremely poor affordability conditions.<\/p>\n
Montreal area\u2014Harsh reality catching up with the market<\/h2>\n
The resiliency of the market over the past few months against the broad softening trend is now being tested. We estimate home resales fell more than 10% m\/m (seasonally adjusted) last month. The last time activity was this soft in October was way back in 2001. The balance between demand and supply has loosened as a result, putting home prices under downward pressure. The median price for a single-family home in the area edged 0.7% lower m\/m in October and 3.0% for a condo apartment (though following a 2.3% increase in September). With inventories now rebuilding\u2014new listings are up m\/m in seven out of 10 months so far this year, including in October\u2014and the likelihood buyers will remain on the defensive into next year, we see further downside for prices in the coming months.<\/p>\n
Vancouver area \u2014 Lack of affordability curbs buyer appetite<\/h2>\n
The weakening trend in Vancouver continued into October. Plunging more than 10% m\/m (by our own seasonally-adjusted estimate), residential sales are now below year-ago levels\u2014and the lowest they\u2019ve been since March. Though October didn\u2019t attract the same influx of new sellers as September did (we estimate new listings actually fell about 3% m\/m seasonally adjusted), the pullback in sales drove demand-supply conditions closer to a buyers\u2019 market. Price momentum slowed as a result. The MLS HPI in fact dipped 0.6% last month, which held the increase from a year ago at 4.4%, unchanged from September. With the market now in full-blown cooling mode amid high interest rates and crushing unaffordability levels, annual price growth may be close to its apex this cycle. We expect tepid demand and a growing inflow of sellers to tip the scale in favour of buyers and sustain the softening in prices in the months ahead.<\/p>\n
Calgary\u2014 Market bullishness tapering off<\/h2>\n
Rapid population growth and a relative affordability advantage are starting to wear off as powerful drivers of real estate activity in Calgary. Home resales have declined back-to-back in the last two months, including an estimated 12% m\/m drop (seasonally adjusted) in October. Nonetheless, Calgary remains Canada\u2019s hottest market at this stage with sellers still holding significant pricing power amid strong competition between buyers and low inventories. Property values continue to appreciate at a solid clip. The MLS HPI is up 9.7% from a year ago, the fastest rate of increase among Canada\u2019s major markets. While the pace is likely to ease, we think price momentum is poised to stay positive in the near term.<\/p>\n
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