Home sales cool in August, but average prices still well up from last year

Canada's housing market continued to show signs of a slow cool-down in August, as the number of sales ticked lower even as selling prices still headed higher compared to where they were a year ago.

The Canadian Real Estate Association said Wednesday that48,379 homes changed hands in August, down0.5 per cent fromJuly and down by about14 per cent compared to the number of sales clocked this time last year.

About half of all markets are seeing more houses change hands, while the other half are seeing fewer. Shaun Cathcart, chief economist for the group that represents more than 100,000 realtors across the country, said the market seems to be moving into a new phase.

"Canadian housing markets appear to be stabilizing somewhere in between pre- and peak-pandemic levels which is to say, still extremely unbalanced," he said in a release.

While the market may be slowing down in many parts of the country, so far that's not translating into lower prices in the aggregate. The average selling price of a home last month was$663,500. That's up from the $586,000 average selling price in August 2020, but down from the all-time high of $716,000 set in March 2021, when bubble fears were bubbling over.

Prices are down from March, on average, and so are sales volumes down by 28 per cent from their March peak.

CREA says the average price number can be misleading because it is easily skewed by sales in big expensive markets like Toronto and Vancouver. Instead, the organizationtrumpets another number the house price index because it adjusts for the types of homes sold. That figure rose by more than 20 per cent in the year up to August, after also having peaked in March 2021.

Economist Rishi Sondhi with Toronto-Dominion Bank says home sales are falling, but from a level that was unsustainable to begin with. "Markets have so far been tighter than expected in the third quarter," he said in a note to clients. "This suggests home prices could continue to rise in the near-term."

Economist Robert Kavcicwith Bank of Montreal says the market has cooled from its March highs, but on the whole demand is still at historically high levels. Sales may be down by almost a third from March, but they are still up 20 per cent from where they were before the pandemic, he noted.

"In other words, the extreme conditions that prompted much concern in policy circles have ebbed, but if not for that burst of madness, we would still be writing about record activity levels today," he said.

That strong demand for housing is why he thinks prices are more likely to go up than down in the near term at least.

"While activity has backed off from the early-year madness, this is still a very strong market characterized by elevated demand that's right, demand and upward price pressure," he said.