Housing market rebounded in May from record lows earlier in the year, CREA says

May was the best month for home sales in 16 months, the Canadian Real Estate Association said Friday, as activity in big cities such as Toronto and Vancouver helped the national market rebound from the doldrums earlier this year.

The group that represents 130,000 realtors across Canada said the number of homes sold in May was 1.9 per cent higher than it was in April. That’s a modest uptick, but it’s the third straight month that the figure has risen since activity plunged to its lowest level in more than six years in February.

Sales in May came in 8.9 per cent higher than the trough they plunged into that month.

CREA says about half the markets across the country actually saw slower sales in May, but big cities such as Toronto and Vancouver saw gains, which offset declines elsewhere.

Toronto Dominion Bank economist Rishi Sondhi said May’s numbers suggest a modest rebound is underway, after a slowdown in 2018 and into this year.

“Home sales continued their improvement in May, stoked by healthy labour markets and the recent slide in mortgage rates,” he said. “Furthermore, markets have had additional time to adjust to federal and provincial policy measures, which weighed significantly on activity last year.”

Prices still sliding in most markets

While sales seem to be rebounding, there are still weakness on the price side.

The Multiple Listing Service House Price Index — a figure that CREA tabulates by aggregating sales prices across different types of housing, in different markets, in order to assess the overall market — inched down by 0.2 per cent in May compared to April, and by 0.6 per cent compared to where it was a year ago.

The MLS HPI spent most of the past decade posting nothing but annual gains of between three and 20 per cent, before flipping into negative territory for the past five months.

The slump means CREA’s index of prices is now 1.4 per cent below the peak it hit in December. But there are wide variations across the country, punctuated by large declines through most of B.C. and the Prairies, and modest to strong gains in Ontario and points east.

House prices have gone up and down unevenly across the country this year. (Skodt McNalty/CBC)

CREA chief economist Gregory Klump blamed the mortgage stress test implemented in early 2018 for continuing to whipsaw the balance between supply and demand.

“The mortgage stress test continues to present challenges for homebuyers in housing markets where they have plenty of homes to choose from but are forced by the test to save up a bigger down payment,” he said.

May was the busiest month for home sales in Canada since the federal government made it harder to get a mortgage in January 2018.

“Hopefully the stress test can be fine-tuned to enable homebuyers to qualify for mortgage financing sooner without causing prices to shoot up,” Klump said.

The average price of a Canadian home sold in May was $508,000, CREA said. But stripping out big, expensive markets in Toronto and Vancouver from the calculation causes the average to drop by $111,000, to slightly less than $397,000.