By Paul Vieira
OTTAWA--Canadian existing-home sales declined in May, or a fourth-straight month of lower transactions, while the number of homes on the market reached the highest level in nearly five years. House prices also weakened.
Falling sales for April and May, or the start of the historically busy spring real-estate season, signals either broad weakness among consumers and reflects the strains on home-ownership affordability; or, economists say, a decision by would-be buyers to wait for meaningful interest-rate relief.
National existing-home sales fell 0.6% in May, according to the Canadian Real Estate Association's monthly data. Actual, or nonadjusted, monthly sales activity was 5.9% lower than the same year-ago month.
"May was another sleepy month for housing activity in Canada, although it may prove to be the last of those now that interest rates have moved lower," said Shaun Cathcart, an economist at the association. The Bank of Canada cut its main interest rate about two weeks ago, to 4.75% from 5%. Central bank officials said last week Canadians can expect more rate cuts in the months ahead so long as inflation continues to exhibit signs of slowing.
The resale housing market was subdued across much of the country in May ahead of the first Bank of Canada rate cut, said Robert Kavcic, an economist at BMO Capital Markets. Canada's central bank "will surely have eyes on how conditions evolve post-cut, but so far there has been little to suggest a significant rebound in activity or prices."
The number of new listings across the country rose 0.5% in May. Overall, there are now 4.4 months of residential real-estate inventory on the market, or the highest level since the fall of 2019. Listings rose sharply in Toronto, Canada's largest urban market, by 22.5% from the same year-ago month. Toronto real-estate agents say this reflects an exit by investors, especially in the condo market.
The real-estate data indicated that benchmark house prices, calculated in a similar fashion to the S&P CoreLogic Case-Shiller National Home Price Index, fell in May, down 0.2% from April to 714,300 Canadian dollars, or the equivalent of $520,000. On a one-year basis, benchmark home prices fell 2.4%. Still, home prices are about 38% above 2019 levels.
Bank of Canada data indicate housing affordability - measured by the share of after-tax income on home-related expenditures - remains stretched, and at some of the tightest levels in four decades.
Data for the first quarter from the credit-monitoring firm Equifax indicate more Canadian homeowners are falling behind on their mortgage payments, raising concerns that high interest rates are pushing Canadian borrowers to the brink.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
06-17-24 1055ET
