Home sales dropped 22% in May as interest rates cool housing market: CREA

Home sales dropped 22 per cent year-over-year in May, according to the Canadian Real Estate Association, as rising mortgage rates weigh on sales.

Canada’s housing market continued to cool last month with the country’s real estate association finding home sales dropped by nearly 22 per cent since last year and almost nine per cent between April and May.

The Canadian Real Estate Association (CREA) said Wednesday that on a year-over-year and non-seasonally adjusted basis, sales amounted to 53,720, a fall from 68,598 in May 2021. Seasonally adjusted sales for the month totalled 42,649, down from 46,644 in April.

“Ultimately this has been expected and forecast for some time — a slowdown to more normal levels of sales activity and a flattening out of prices,” said Shaun Cathcart, CREA’s senior economist, in a release.

“What is surprising is how fast we got here.”

The moderation came after the country rang in the new year with soaring prices and a torrid pace of sales that prompted provinces and the federal government to eye a suite of cooling measures.

Ontario, for example, increased a tax on non-resident homebuyers to 20 per cent from 15 per cent in March and broadened the policy to the entire province instead of just the Greater Golden Horseshoe.

But even more impactful than the patchwork of policies has been rising interest and mortgage rates, which economists attribute much of the cooling to.

“Canadians widely expected home prices to keep rising, which pulled in investors and multiple-property buyers, while also causing many households to stretch in fear of missing out,” said Robert Kavcic, BMO Capital Markets senior economist Robert Kavcic.