BMO Economics predicts a decline in July’s statistics on existing house sales and prices. Almost every major Canadian real estate market has seen a decline in buyer interest and sales volume recently. It is believed that this would be reflected in national statistics since higher rates send a signal to markets.
Expected Decline in Canadian Property Sales
After five consecutive months of increases, existing house sales are expected to decline this month. “The housing market’s recovery lost some steam in July as the Bank of Canada raised rates for the second straight meeting after pausing earlier in the year,” BMO said to investors.
The bank notes, “Monthly sales likely to decrease following five months of growth after the Bank sat on the sidelines. Even so, we anticipate a 10% increase over the lower levels seen a year ago.
BMO’s emphasis on slowing growth while still predicting yearly increase might be misleading. The base effect is to blame, since last July was one of the slowest on record. A mere 10% yearly growth rate doesn’t do justice to the current market. The monthly prediction amounts to a massive 16.7% drop from the previous month. The market is not just lethargic; BMO claims it is trending in the wrong direction, making a rebound much less likely.
Declining Home Price Growth in Canada
Canada’s biggest real estate areas had monthly price reductions earlier this month, however national figures may be delayed. According to the bank’s July projections, the MLS HPI will end up 1.5% lower than in 2017. When compared to the 4.5 percent drop seen in June, this represents progress. Well-known experts have said that the index distorts trends and no longer represents reality.
This group still uses the median selling price. BMO predicts a slowdown in annual growth to 3.5% in July from 6.7% in June. It demonstrates faster growth at first, followed by a steep deceleration. If this trend continues, we may see average selling prices go below zero again.
Rising interest rates are the primary factor in the market downturn projection revision. Optimistic market participants re-entered the market after the “pause,” thinking the worst was gone. Since then, two price increases have reassured investors.
Don’t expect any end-user engagement anytime soon. Prices have decreased more rapidly than financing has risen due to the increase in interest rates, which has improved affordability. However, most end-users still cannot afford to purchase a house in the current market. As a result of the low-rate boom, affordability plummeted to a record low, with investors replacing first-time purchasers.