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“Ultimately, this has been expected and predicted for some time – a slowdown to a more normal level of sales activity and price flattening,” Sean Cathcart, senior economist at CREA, said in a press release.

“What’s amazing is how quickly we got here.”

The moderation came as the country welcomed the new year with price spikes and a frenetic pace of sales, prompting provinces and the federal government to consider a set of cooling measures.

Ontario, for example, increased the tax on non-resident homebuyers to 20% from 15% in March and extended the policy to the entire province, not just the Great Golden Horseshoe.

But more of an impact than a patchwork of politics has been the rise in interest rates and mortgage rates, to which economists attribute much of the cooling.

“Canadians generally expected home prices to continue to rise, which attracted investors and buyers of several properties, and made many households tense for fear of missing out,” said Robert Kavcic, senior economist at BMO Capital Markets.

“But since the first push (of the Bank of Canada) in interest rates, those market expectations have started to crumble.”

Realtors are now noticing that potential buyers are negotiating more than they could in previous months, while sellers are still coming to terms with how the market has changed, and some are even holding back from listing their homes for sale.

When Sarah Roushanbin, broker Chestnut Park Real Estate Ltd. in the Greater Toronto Area tells its customers they can request a home inspection, their eyes light up because most buyers had to forego that provision when the market was previously hot. Now about 50% of the bets she helps place have this condition again.

However, how sellers are responding to offers made with the cooling market in mind is “everywhere”.

“Some people welcome them with open arms and say, ‘Let’s work on this together,’ and others say, ‘Is this a typo? so can you tell? The market has changed very quickly,” she said.

As a result, CREA found that sales in May resembled levels of activity seen in the second half of 2019, before the onset of the Covid-19 pandemic, but noted that the decline in sales in April was sharper.

May sales declined in three-quarters of all local markets, primarily in regions such as the Lower Mainland in British Columbia, Calgary, Edmonton, the Greater Toronto Area and Ottawa.

The association currently expects 568,288 properties to change hands this year, down 14.7% from 2021 but still the second-highest annual figure ever. Sales are forecast to fall another 2.8% to 552,403 homes in 2023.

However, there will be little price reduction.

CREA forecasts the national median home price to rise 10.8% year on year to $762,386 in 2022 and expects the largest increases to come from the Maritime Provinces, Ontario and Quebec. Then the national median home will rise another 3.1% to $786,282 in 2023.

The seasonally adjusted average price in May was $700,438, down almost 4% from $728,171 in April.

The seasonally adjusted median price was $711,316, up about 3% from $687,595 a year earlier.

New listings rose a seasonally adjusted 4.5% from 70,971 in April to 74,145 in May as new supply increased in Montreal.

The seasonally adjusted total for new listings last month was 100,643, up over 6% from 94,704 in May 2021.

Rovshanbin noted that supply has not kept pace with immigration, but once they balance each other, she expects the market to “go crazy.”

“Once it stabilizes, or goes down, or something like that, the market will go crazy,” Rovshanbin said. “It’s going to be ancestral madness.”

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