Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Housing activity improved in June for a third consecutive month. The increase in sales is mainly due to Ontario, BC and Quebec. With sales activity lower and inventories higher over the past year, house prices are declining by 3.6% y-o-y in June.
The elevated uncertainty caused by the US tariff threat and the increased likelihood of a recession in Canada earlier this year was a significant drag on the housing market, especially in Ontario. However, with the extreme uncertainty receding slightly in recent months, leading to improved consumer confidence, we could continue to see a modest recovery in housing activity. Signs that the economy may be stabilizing and a lack of significant layoffs suggest that the economy is no longer deteriorating.
Nevertheless, uncertainty is expected to remain elevated, suggesting that any improvement in the housing market in the coming months is likely to be modest. However, lower interest rates and better affordability could provide support in some markets. The main risk to the housing market remains a deterioration of the labour market leading to significant.
In Alberta, housing market activity remained robust by historical standards, despite some continued slowing in recent months. We note that Edmonton continues to outperform Calgary. Strong migration into Alberta, combined with affordability, is a significant support for housing activity and prices compared to other parts of the country.
Activity in the Canadian housing market rose by 2.8% m-o-m seasonally-adjusted in June. The number of transactions, at 38.7k, 0.5% lower than for the same month in the preceding years. The increase in activity in June was mainly the result of increased activity in PEI (+7.0% m-o-m), BC (+5.8% m-o-m), Ontario (+5.3% m-o-m), and Nova Scotia (+3.5% m-o-m). The higher activity in BC in June comes after six consecutive months of declines. On the flip side, activity was lower in New Brunswick (-6.4% m-o-m), Newfoundland (-4.5% m-o-m), Manitoba (-2.1%m-o-m) and Alberta (-1.7% m-o-m).
Compared to the average level of 2019, the number of transactions is about 6.7% lower nationally but continues to be well above its pre-pandemic level in Newfoundland (+42%), Saskatchewan (+44%), and Alberta (+41%). On the flip side, activity is well below pre-pandemic in Ontario (-26%), Nova Scotia (-11%) and BC (-11%).
New listings eased 2.9% m-o-m seasonally-adjusted in June, after a an increase in May, and were 4.4% higher compared to the prior year. The decrease in new listings was seen in most provinces led by Manitoba (-6.4% m-o-m), Saskatchewan (-4.5% m-o-m), Ontario (-4.3% m-o-m) and Alberta (-4.1% m-o-m). On the flip side, new listings increased in Newfoundland (+11.6% m-o-m) and New Brunswick (+6.9% m-o-m).
With sales activity being stronger than new listings in many regions, the month-of-supply measure[1] eased to 5.1 nationally, on par with its 2019 level. Based on this measure, most provinces saw a reduction in inventories. Inventories declined the most in PEI, BC, Ontario, and Saskatchewan, while they increased in Newfoundland, Alberta, Manitoba, and New Brunswick.
Inventories are the lowest in Manitoba (2.2 months), Alberta (3.0 months), and Saskatchewan (3.4 months), while they are the highest in BC (7.1 months), PEI (5.8 months), Newfoundland (5.2 months), and Ontario (5.0 months).
Compared to 2019, inventories in Ontario are 2.6 months higher and 1.6 months higher in BC, while they remain well below in Newfoundland (-10.1 months), and Saskatchewan (-7.2 months)
With a month-of-supply at 3.0, Alberta’s housing market remains well below historical standards.
With weak sales and higher inventories compared to last year, the MLS House Price Index decreased 0.2% m-o-m in June. Compared to the previous year, house prices nationally were lower by 3.6% y-o-y.
The biggest monthly price increases were in PEI (+1.6% m-o-m), Newfoundland (+1.3% m-o-m), and Nova Scotia (+0.4% m-o-m). Prices decreased the most in Ontario (-0.7% m-o-m), Alberta (-0.4% m-o-m), and BC (-0.3% m-o-m).
On a y-o-y basis, Ontario (-6.8% y-o-y), BC (-2.2% y-o-y) were the only provinces where prices declined. Prices increased the most in Newfoundland (+10.7% y-o-y), Quebec (+8.5% y-o-y), Manitoba (+7.5% y-o-y), and New Brunswick (+7.1%).
Compared to their recent peaks in early 2022, prices have declined by 17.6% nationally. However, prices are still about 27% higher than in January 2020 on the eve of the pandemic. Compared to their recent peak, prices dropped the most in Ontario (-24.0%) and BC (-10.2%). On the flip side, prices have remained neutral in Quebec (+0.0%), Newfoundland (+0.0%) PEI (+0.0%).
In Alberta, benchmark prices were eased 0.4% m-o-m and are up 0.9% y-o-y. Prices in Calgary eased 0.4% m-o-m (-1.4% y-o-y) while decreasing 0.4% m-o-m in Edmonton (+8.4% y-o-y). Edmonton has been outperforming relative to Calgary in recent months. Strong population growth and better affordability could explain the better performance in Edmonton.
In Alberta, sales activity declined 9.0% y-o-y in June, but the housing market remains robust with transactions still well above their pre-pandemic level. (see table below for details).
On a 3-month moving average of the year-on-year, transactions decreased 8.4% in the province, with strong increases in Alberta West (+15.0%), Lloydminster (+14.9%), Grande Prairie (+12.4%), and South Central Alberta (+8.1%), and. On the flip side, activity was lower in Calgary (-16.1%), Edmonton (-5.6%), Central Alberta (-3.2%) and Medicine Hat (-2.7%).
Compared to the average level of transactions in 2019, activity in the province increased by 41%, led by Edmonton (+57%), Central Alberta (56%), Lloydminster (+41%), and Calgary (+33%).
New listings were higher than last year at the provincial level (10.0%). However, there are some significant differences regionally. On a 3-month moving average of the year-on-year, new listings increased the most in Calgary (+18.1%), Edmonton (+12.4%),Lloydminster (+5.7%) and South Central Alberta (+5.3%). New listings declined the most over the same period in Alberta West (-9.6%), and Lethbridge (-8.2%).
With sales below new listings in June, some regions saw an easing in market conditions. The primary seller’s markets and Grande Prairie, Lethbridge, Medicine Hat, and Alberta West. The main buyer’s market is Calgary.
Average house prices in the province increased by 4.3% on a 3-month moving average of the year-on-year in the province. Prices are higher in all regions, except for South Central Alberta (-17.5%) and Fort McMurray (-1.8%). Prices rose the most in Lloydminster (+21.0%), Grande Prairie (+18.3%), Alberta West (+17.5%), and Lethbridge (+12.9%).