More sellers returned to Canadian housing markets in May, according to the latest numbers from local real estate boards, but a new report from RBC Economics cautions that it’s not enough to bring those markets into balance.

“Sellers are beginning to warm up to recovering housing markets,” writes Assistant Chief Economist Robert Hogue in Tuesday’s report. “Early reports from local real estate boards unanimously show a material rise in new listings in May. This is good news for buyers who have been frustrated by historically low inventories. But in most cases, the rise in supply made only a small dent in tight demand-supply conditions.”

Hogue goes on to say that in order to quell demand, a “further large influx” of sellers is needed. In the meantime, prices are being pushed upwards across the board.

“We think higher prices will play their role as a stabilizer for the market: cooling demand and pulling in more supply. Our view is that mechanism as well as affordability issues will restrain further price appreciation. However, the current market strength clearly poses upside risks.”

Vancouver “New Buying Opportunities”

“More sellers stepped into the market in May, taking advantage of increasingly favourable conditions over the past few months,” writes Hogue of Vancouver’s market. On a seasonally adjusted basis, RBC estimates that the Vancouver area saw a 15% spike in new listings between April and May, marking the largest increase since January. “These new buying opportunities generated further increases in resale transactions, extending the current upswing to four months.”

Nonetheless, demand-supply conditions remained tight, and prices continued to trend upwards. For the fourth month in a row, Vancouver’s MLS HPI lifted, growing by 1.3% between April and May.

Says Hogue, “Our view is that extremely poor affordability will significantly limit the speed at which they will rise in the period ahead.”

May’s “Influx” of Home Sellers Not Enough to Quell Demand, Bring Down Prices by Zakiya Kassam | Storeys