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Canadian home sales growth slows; CREA downgrades full-year forecast

Published 07/14/2023, 09:50 AM
Updated 07/14/2023, 12:30 PM
© Reuters. FILE PHOTO: A for sale sign is displayed outside a home in Toronto, Ontario in Toronto, Ontario, Canada December 13, 2021.  REUTERS/Carlos Osorio

By Fergal Smith

TORONTO (Reuters) -Canadian home sales rose in June at a slower pace than in recent months and the industry group that produces the data downgraded its forecast for the full year as the Bank of Canada restarted its interest rate hiking campaign.

The Canadian Real Estate Association (CREA) forecast on Friday that sales would decline 6.8% this year from 2022 to 464,239 properties, compared to a 1.1% decline expected in April.

The 2024 outlook was also lowered, with the industry group projecting home sales of 516,072 units, down from 561,090 previously.

"With the Bank of Canada unexpectedly ending its pause on rate hikes in June and hiking again in July, a major source of uncertainty has returned to the housing market," CREA said in a statement.

The BoC raised interest rates in June for the first time since January. On Wednesday, it tightened further, lifting its benchmark rate to a 22-year high of 5%.

Home sales rose 1.5% in June from May, a smaller increase than was posted in April and May, monthly data from CREA showed. Sales were up 4.7% on an annual basis.

The data "points to some degree of resilience on the part of housing demand to the Bank of Canada's rate hike last month," Marc Ercolao, an economist at TD Economics, said in a note.

"We still think that home sales will decline, on average, in the second half of this year, with some near-term negative impact coming from this week's interest rate hike."

© Reuters. FILE PHOTO: A for sale sign is displayed outside a home in Toronto, Ontario in Toronto, Ontario, Canada December 13, 2021.  REUTERS/Carlos Osorio

CREA's Home Price Index climbed 2% on the month but was down 4.7% annually, while the national average selling price was up 6.7% on the year.

The number of newly listed homes was up 5.9% in June from May, extending the recovery from a 20-year low in March and moving closer to more normal levels.

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