The numbers are in and the month of April was the cruellest for the housing market, according to one economist.
Home sales data shows softening in Canada's four largest markets, especially Toronto, where prices may have peaked, says RBC Economics.
Carrie Freestone, economist at the Bank of Canada, said that all evidence points to the Bank of Canada's rate tightening cycle.
The drop in sales and slowing home price growth signals a market shift is underway, says RBC.
In April, sales fell 26% in Toronto from March, 22% in Calgary and 17% in Vancouver. Toronto's decline in home sales was the sharpest single-month decline since the market correction in the late 80 s, according to Freestone.
Home sales in other major Canadian markets have sunk below pre-pandemic levels, according to Capital Economics.
Prices have started to cool. Toronto prices dropped 6.4% in April on a seasonally adjusted basis from the month before, the worst drop since April 2020, when the pandemic froze the market. Vancouver prices went up 1%, but that is half the average pace over the past six months, said RBC.
Another indicator is sales-to-new-listings ratios that declined in Toronto, Vancouver and Montreal as fewer Canadians listed their homes, and those who saw them sitting on the market longer, said Freestone. Calgary saw the ratio go higher into seller's market territory among major markets.
Capital s senior Canada economist Stephen Brown said April was the cruellest month for the housing market, with the recent jump in mortgage rates causing large falls in sales across the country.
The cheapest is 4.04%, a rate that is two-and-a-half times higher than the record low of 1.64% seen just 16 months ago, he said.
McLister cites TD research that believes 5 year fixed rates have increased 140 basis points year to date, which is equivalent to a 12% decline in affordability for the average homebuyer.
In the last year, rising rates have reduced housing activity by 10 -- 22%, said TD.
The drop in real estate activity alone could cut 0.2% off the month s gross domestic product, according to Capital, which estimates April s slump in home sales and the unexpected fall in hours seen in Friday's job data could weigh on GDP.
A fall in April's GDP is unlikely to cause a pause in the Bank of Canada's hiking cycle, said Brown, however the plunge in home sales reinforces our view that the Bank is underestimating the impact that tighter monetary policy will have on the economy. Capital expects that further drops in home sales and a decline in residential investment in the coming quarters will push GDP growth down in 2023 and cause the Bank to pause its tightening sooner than markets expect.