The Teranet-National Bank Composite Index declined for the sixth consecutive month in May, with Canadian home prices falling 1.0% on a month-over-month basis, said National Bank of Canada on Wednesday.
This cumulative decline amounts to 4.0% over the past six months and 4.3% over the past year, the bank added, noting the continued decline in prices in May comes amid a context where transaction volumes in the resale market remain depressed relative to their historical average.
But, the bank said, home sales in the resale market have rebounded over the past two months, a recovery that could continue in the coming months thanks to the recent improvement in consumer confidence and the labor market.
Real estate market conditions have also tightened in several regions, although they remain relatively loose for now in Toronto and Vancouver, National Bank noted. "We therefore expect these markets to gradually stabilize over the coming months and may even see price increases by the end of the year," the bank said.
It turns out, the bank added, that prices in real terms have experienced significant corrections from their 2022 peaks in these two major markets, leading to a notable improvement in affordability. "This improvement in accessibility, which has been pronounced over the past year, could be one of the factors behind the recent rebound in transactions in the resale market."
However, several factors could limit the extent of this recovery and constrain price growth, including demographic decline, fixed mortgage rates that remain high and have risen sharply since February, and uncertainty surrounding the renewal of the USMCA, according to the bank.