Canadian home prices as measured by the seasonally adjusted Aggregate Composite MLS Home Price Index (HPI) were flat on a month-over-month basis in February 2024, ending a streak of five declines that began last fall, according to the latest data released Monday by the Canadian Real Estate Association (CREA).
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“The fact that prices were unchanged from January to February was noteworthy given they had dropped 1.3% from December to January. Considering how stable the seasonally adjusted MLS HPI tends to be, shifts this abrupt are exceedingly rare,” said the national organization.
“There have only been three other times in the last 20 years that have shared a sudden improvement or increase in the month-over-month percentage change from one month to the next of this size; all at various points in the last four years when demand was coming off the sidelines.”
“It’s looking like February may end up being the last relatively uneventful month of the year as far as the 2024 housing story goes,” said Shaun Cathcart, CREA’s Senior Economist. “With so much demand having piled up on the sidelines, the story will likely be less about the exact timing of interest rate cuts and more about how many homes come up for sale this year.”
CREA said home sales activity recorded over Canadian MLS Systems dipped 3.1% between January and February 2024, giving back some of the cumulative 12.7% increase in activity recorded in December 2023 and January 2024. That said, the general trend has been somewhat higher levels of activity over the last three months compared to a quiet fall market in 2023, it said.
The number of transactions came in 19.7% above February 2023. Part of that double-digit gain reflects the fact that February 2023 sales were one of the lowest for that month in the past two decades, but it also reflects the fact that current activity has climbed back to only around 5% below the 10-year average, said CREA, adding the number of newly listed homes edged up 1.6% on a month-over-month basis in February.
“With sales edging down and new listings inching up in February, the national sales-to-new listings ratio eased a bit to 55.6%. The long-term average for the national sales-to-new listings ratio is 55%. A sales-to-new listings ratio between 45% and 65% is generally consistent with balanced housing market conditions, with readings above and below this range indicating sellers’ and buyers’ markets respectively,” said CREA.
“There were 3.8 months of inventory on a national basis at the end of February 2024, up a touch from 3.7 months at the end of January. The long-term average is about five months of inventory.
“The actual (not seasonally adjusted) national average home price was $685,809 in February 2024, up 3.5% from February 2023.”
Despite the mild loosening in conditions last month (sales down, listings up), prices stabilized in February after a five-month skid, said Douglas Porter, Chief Economist with BMO Economics.
“Even with the latest moderate pullback in sales, the past few months of data suggest the housing market is finding a bottom. The next test is whether the recent back-up in bond yields—five-years are up more than 40 bps since the start of 2024—weighs on sentiment and activity. At the same time, the Bank of Canada has consistently preached patience, and is in no rush to offer rate relief. Still, the torrid population growth of the past few years is a huge source of support for housing, and when rates do eventually start to come down, we expect activity to pick up in a hurry,” he said.
Rishi Sondhi, Economist with TD Economics, said sales activity took a breather in February, likely weighed down by the upward creep in bond yields from the beginning of the year through the middle part of the month.
“And even though Canadian home sales have been highly volatile in the past few months, they’re still tracking a solid first quarter gain. Should this increase manifest, it would support residential investment growth in the first quarter and help to partially offset what looks to be a Q1 decline in housing starts. We should also note that Canadian home sales remain well below pre-pandemic levels, due to subdued activity in B.C., Ontario, and Quebec. This suggests that significant pent-up demand remains in these markets,” said Sondhi.
“Canadian average home price growth declined in February, and relatively loose conditions in Ontario and B.C. should keep it subdued over the next few months. That said, conditions in markets outside of these two provinces are much tighter, suggesting that firmer increases are likely outside of B.C. and Ontario.”
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
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