Canada’s housing market cooled further in November as sellers joined buyers on the sidelines, hoping for activity to heat back up in the spring, according to the national real estate association.
Some market watchers are meanwhile calling for a return to pandemic-era highs for home prices on the back of expected interest rate cuts in the new year, though not all provinces are forecast to see such a rapid recovery.
Sales activity in November slowed nearly a percentage point month-over-month, the Canadian Real Estate Association said in a release Thursday.
CREA said that the number of newly listed homes also declined for the second month in a row.
Shaun Cathcart, CREA’s senior economist, said in a statement that sellers likely weren’t getting offers they were willing to accept with few buyers in the market this fall, and have instead opted to “hunker down” in hopes of a better deal in 2024.
“It’s probably a good move given that recent expectations around interest rate cuts suggest it might be a somewhat more active spring market than we thought,” he said.
CREA’s home price index declined 1.1 per cent month-to-month. The national average sale price for a home in November was $646,134, up two per cent from the same time last year.
The national real estate body says that price declines are still “mainly an Ontario phenomenon,” but markets including the Fraser Valley, Halifax and Winnipeg also saw values drop in November.
On the other hand, CREA said Alberta, Saskatchewan, New Brunswick, Prince Edward Island and Newfoundland and Labrador are seeing prices still hold firm or even rise heading into the final month of 2023.
Royal LePage forecasts return to pandemic price peak
A new forecast released from Royal LePage on Thursday expects the cooling in the housing market to reverse in the second half of the year, driven in part by a shift to interest rate cuts from the Bank of Canada.
But CEO Phil Soper tells Global News that even before that point, he expects housing activity to bottom out in the first quarter of 2024 en route to a seasonal spring boom as Canadians accept that the days of ultra-low interest rates are done.
“We believe the great adjustment will come when the collective consciousness of Canadians realizes that we are in a period of mid-single digit borrowing costs and that is the new normal,” he says.
When the decline in real estate values ends and buyers start to see monthly sale prices tick back up again, Soper argues they’ll have more confidence that the home they buy today won’t be worth less tomorrow.
That, coinciding with expectations for stability in borrowing rates, will be enough to wake the slowing housing market up in the spring, he says.
“We believe, come the February timeframe, when the spring market typically kicks off in Canada, we’ll see a gradual return to more normal transaction levels even without a cut to mortgage rates,” Soper says.
BMO senior economist Robert Kavcic said in a note to clients on Thursday that he still sees “downward pressure” on housing markets through the spring — “namely Ontario,” he said — but he added that easing borrowing costs and pent-up demand from buyers could finally put a floor on the correction.
Kavcic cautioned, as well, that the level of activity in the spring housing market is partially dependent on how well the economy holds up, or if Canadians face a recession with widespread job losses.
Royal LePage forecasts that, with rate cuts possibly beginning next summer, the aggregate price of a home in Canada will rise 5.5 per cent annually by the fourth quarter of 2024. That would mean that, by the end of next year, home values would have “essentially climbed back to their pandemic peak” seen in the first quarter of 2022.
Kavcic said, however, that with ongoing weakness in the GTA and southwestern Ontario, “the path back to the 2022 price peak will be a long one in Ontario.”
“Think years, not months,” he said.
According to Royal LePage, the Greater Toronto and Montreal areas are primed to end 2024 with price growth of six and five per cent year-over-year, while the Greater Vancouver area is slated for more “modest” growth of three per cent annually.
In this scenario, Calgary’s prices would rise eight per cent annually by the fourth quarter of 2024. Soper says that Calgary, and Alberta more widely, remain a “standout” among other markets thanks to its relative affordability and the advent of virtual working arrangements luring workers from their home provinces to a region where they can afford to buy a larger home.