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Canada home sales, prices drop on month in May amid buyer fatigue

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Canadian home sales and the average price fell in May compared with the previous month, as frustrated would-be buyers took a break and some of the pandemic urgency to secure a home began to fade, the Canadian Real Estate Association (CREA) said on Tuesday.

Canadian home sales fell 7.4% in May from April, while the average selling price was down 1.1% from the previous month, according to CREA data. It was the second consecutive month of declines after a blazing start to the year.

“While housing markets across Canada remain very active, we now have two months of moderating activity in the books, and that goes for demand, supply and prices,” Cliff Stevenson, chair of CREA, said in a statement.

“More and more, there is anecdotal evidence of offer fatigue and frustration among buyers, and the urgency to lock down a place to ride out COVID would also be expected to fade at this point given where we are with the pandemic,” he added.

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Provinces across Canada have begun reopening from a third round of shutdowns and COVID-19 vaccinations are being rapidly deployed, buoying hopes of a return to normal in the second half of the year.

Canada‘s housing market surged in late 2020 and early 2021, with home prices escalating sharply amid investor activity and fear of missing out. Many smaller centers saw record price gains as urbanites fled to suburbs and beyond in search of more space.

The national average selling price was C$696,000 ($571,429) in May, down 1.1% from April but up 38.4% from a year earlier, the industry group said. Home prices fell in April and May of last year amid first-wave COVID-19 shutdowns.

Actual sales, not seasonally adjusted, rose 103.6% from a year earlier, while CREA’s Home Price Index was up 24.4% on the year and up 1% from April.

Canadian housing starts, meanwhile, rose 3.2% in May compared with April as multiple urban starts jumped, offsetting a drop in single-detached starts, separate data from the Canadian Mortgage and Housing Corporation showed.

“Toronto, Vancouver and Montreal starts trended lower in May, as these markets continued to moderate from the historical highs recorded in the first quarter of the year,” said Bob Dugan, chief economist at CMHC, in a statement.

($1 = 1.2180 Canadian dollars)

(Reporting by Julie Gordon in Ottawa; editing by Jonathan Oatis)

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The Realtors' Big Defeat – The New York Times

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A settlement in the real estate industry is a case study of a central flaw in free-market economic theory.

Free-market economic theory suggests that the American real estate market should not have been able to exist as it has for decades.

Americans have long paid unusually high commissions to real estate agents. The typical commission in the U.S. has been almost 6 percent, compared with 4.5 percent in Germany, 2.5 percent in Australia and 1.3 percent in Britain. As a recent headline in The Wall Street Journal put it, “Almost no one pays a 6 percent real-estate commission — except Americans.”

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If housing operated as an efficient economic market should, competition would have solved this problem. Some real estate brokers, recognizing the chance to win business by charging lower commissions, would have done so. Other brokers would have had to reduce their own commissions or lose customers. Eventually, commissions would have settled in a reasonable place, high enough for agents to make a profit but in line with the rest of the world.

That didn’t happen. Instead, an average home sale in the U.S. has cost between $5,000 and $15,000 more than it would have without the inflated commissions. This money has been akin to a tax, collected by real estate agents instead of the government.

The situation finally seems to be ending, though. On Friday, the National Association of Realtors, the industry group that has enforced the rules that led to the 6 percent commission, agreed to change its behavior as part of an agreement to settle several lawsuits.

The settlement is important in its own right. Americans now spend about $100 billion a year on commissions. That number will probably decline by between $20 billion and $50 billion, Steve Brobeck, the former head of the Consumer Federation of America, told my colleague Debra Kamin.

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Allied REIT buys out Westbank on two building projects, the Home of the Week and more top real estate stories – The Globe and Mail

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Home of the Week, 80 John St., Upper Penthouse 1, TorontoJohn Lee/John Lee/Soare Productions

Here are The Globe and Mail’s top housing and real estate stories this week and one home worth a look.

Take The Globe’s business and investing news quiz

Canadians’ wealth is bolstered by stock rally amid housing slump, Statscan says

In the fourth quarter, households saw their net worth rise by $290-billion, or 1.8 per cent, to roughly $16.4-trillion, Statistics Canada said in a report Wednesday. But many homeowners have yet to face the full brunt of higher interest rates until they renew their mortgages, writes Matt Lundy. Others have variable-rate mortgages with fixed payments, which means that as rates have increased, more of their bill is going toward the interest portion rather than paying down the principal. The looming renewals, among other factors, led Canadians to stay cautious about taking on new debt — financial liabilities only rose by 3.4 per cent in 2023.

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Allied REIT takes control of two towers co-developed with Westbank

Allied Properties REIT AP-UN-T is buying out its partner, Westbank Corp., on two office skyscrapers as the Vancouver-based real estate developer faces rising costs and legal claims at projects in Toronto and Seattle, writes Rachelle Younglai and Shane Dingman. The deal, which is expected to close in early April, will significantly cut the amount of debt Westbank owes Allied — giving them an infusion of cash in the process. In November, The Globe and Mail reported that Westbank faced legal claims for $25-million in unpaid work at the Mirvish Village development in Toronto.

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Advertised rents for purpose-built rentals were up 14.4 per cent nationwide in February, compared with the same month in 2023. An apartment rental building in Toronto’s Beach neighbourhood on Mar 11.Fred Lum/The Globe and Mail

Why rent inflation is much higher for rental apartments than for condos

In Canada’s overheated rental market, tenants are increasingly gravitating toward purpose-built rentals, experts say – demand that is driving up rent for these units much faster than for condos, writes Erica Alini. Advertised rents for purpose-built rentals, also called rental apartments, were up 14.4 per cent nationwide in February, compared with last year— rents for condos, on the other hand, grew by just 5 per cent in the same timeframe. A severe supply shortage, affordable prices and the allure of rent control in older buildings is driving up the prices in purpose-built rentals.

Renters have harder time accumulating wealth than homeowners, RBC report says

According to the report, homeowners have seen their net worth grow from nine times household disposable income to 13 times since 2010, while for renters, net wealth grew from three to 3.5 times over the same period. The gap has widened even though renters’ incomes have risen at the same pace as homeowners. Meanwhile, homeowners are also accumulating home equity with their housing payments. The tightening of renters’ incomes will make it even harder to save up for a down payment, economists say.

Home of the week: Festival Tower penthouse with an interior designer touch

  • Home of the Week, 80 John St., Upper Penthouse 1, TorontoJohn Lee/John Lee/Soare Productions

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80 John St., Upper Penthouse 1, Toronto

The 46th-floor penthouse sits right above the TIFF Lightbox theatre, which is home to the Toronto International Film Festival. When you first enter the two-bedroom-plus-den condo, you’re greeted by 11-foot-tall ceilings leading you into the living room. The previous owners had white-lacquered book cases installed on the wall separating the living area from the kitchen — which frames the spacious room — and the primary bedroom has its own hotel-style bathroom attached. The 180-degree view from the penthouse features a panoramic view of the city’s downtown. and stretches across Lake Ontario.

What do you think is the asking price for the property?

a. $2,999,000

b. $3,875,000

c. $4,195,000

d. $4,500,000

c. The asking price is $4,195,000.

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At Real Estate's Biggest Conference, Property Crisis Denial Shifts to Acceptance – Bloomberg

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Welcome to The Brink. I’m Jack Sidders, a reporter usually based in London but this week I’ve been in Cannes where about 20,000 real estate professionals gathered for the annual Mipim conference. We also have news on German giant Bayer, crypto exchange FTX and Swedish debt collector Intrum. Follow this link to subscribe. Send us feedback and tips at debtnews@bloomberg.net or DM on X to @JackSidders.

Mipim is supposed to be a time for developers to show off their grand visions for projects of the future, with cities built in miniature hoping to lure pools of capital that will turn them into full scale realities.

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