Photo: James Bombales

Canadian home sales fell just 0.1 per cent in May, after months of serious drops, according to the latest release from the Canadian Real Estate Association (CREA.)

“On balance, this was a better-than-expected report. Sales were effectively flat during the month – their best turnout so far this year,” writes TD economist Rishi Sondhi, in a recent note.

It could be a sign that the market has finally adjusted to the effects of a new mortgage stress test, which came into effect on January 1 and took a serious bite out of the housing market.

1. Roughly half of local housing markets saw a drop in sales in May, including several BC markets. Sales were up 3.9 per cent in Calgary, 1.1 per cent in Edmonton and 1.6 per cent in the GTA.

2. New listings were up 5.1 per cent month-over-month, after dropping 3.7 per cent in April. Alberta and Saskatchewan both saw huge surges, with Edmonton up 11.9 per cent and Regina up 14.8 per cent.

3. The increase in listings brought the market into full balanced territory, with a sales-to-new-listings ratio of 50.6. A ratio of between 40 and 60 is considered balanced, with readings above and below indicating buyers and sellers markets, respectively.

4. The average home price rose for a second straight month, jumping 0.9 per cent to $496,000.

5. The MLS home price index decelerated to 1 per cent year-over-year, the weakest pace of growth since 2009. The deceleration was particularly notable in the GTA, were the HPI declined by 5.4 per cent year-over-year.

6. “Typically, impacts on demand from [mortgage rule changes] tend to be rapid, but also transitory,” writes Sondhi. “History appears to be repeating itself with the May figures pointing to stabilization…Going forward, we expect activity to find support and begin to recover very gradually in the second half of the year.”

7. “This year’s new stress-test became even more restrictive in May, since the interest rate used to qualify mortgage applications rose early in the month,” writes CREA chief economist Gregory Klump, in a statement. “Further increases in the rate could weigh on home sales activity at a time when Canadian economic growth is facing headwinds from US trade policy frictions.”

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