Canadian home sales begin 2023 at 14-year low

The number of homes sales in Canada in January came in 37.1 per cent below the second-best January ever in 2022. The January 2023 sales figure was the lowest for that month since 2009, reported the Canadian Real Estate Association on Wednesday.

Home sales recorded over Canadian MLS Systems edged back down three per cent between December 2022 and January, giving back all of December’s small gains and rejoining the mild downward trend observed since last summer, it said.

“The big question on everyone’s minds after last year was what will housing markets do in 2023?” said Jill Oudil, Chair of CREA. “We may have to wait another month or two to see what buyers are planning this year since new listings are currently trickling out at near-record low levels, but that should change as  the weather warms.”

“Early 2023 feels a lot like 2019, where after a year in which it became much harder to qualify for a mortgage, everyone was wondering if the market would pick up in the spring,” said Shaun Cathcart, CREA’s Senior Economist. “In 2019 the market started off slow, as there wasn’t much to buy. It took off once spring listings started to come out. With the Bank of Canada increasingly signaling that rates are now at the top, it’s possible the spring market this year could also surprise, particularly in areas where prices have been stable or are now stabilizing. Buyers are likely feeling increasingly confident in taking on variable rate mortgages, and 2023 will probably be a good window of opportunity to be able to engage in a calmer home search and buying experience following the intense market conditions of the last few years.”

The report said the number of newly listed homes picked up by 3.3 per cent on a month-over-month basis in January, led by increases across British Columbia. That said, despite the small increase, nationally, new listings remain historically low. New supply in January hit the lowest level for that month since 2000.

The Aggregate Composite MLS Home Price Index (HPI) was down 1.9 per cent on a month-over-month basis in January, continuing the trend that began last spring, said the report.

“The Aggregate Composite MLS now sits 15 per cent below its peak level, reached in February 2022. Looking across the country, prices are down from peak levels by more than they are nationally in many parts of Ontario and some parts of B.C., and down by less elsewhere. While prices have softened to some degree almost everywhere, Calgary, Regina, Saskatoon, and St. John’s stand out as markets where home prices are barely off their peaks at all.

“An interesting development in recent months has been an increasing number of East Coast markets where prices appear to have bottomed out on a month-to-month basis and are now trending back up. The non-seasonally adjusted Aggregate Composite MLS HPI came in 12.6 per cent below its January 2022 reading. Year-over-year declines will likely hit their highest levels over the next two months as we move past the highest price levels on record in February and March of last year.

“The actual (not seasonally adjusted) national average home price was $612,204 in January 2023, down 18.3 per cent from the same month last year. The national average price is heavily influenced by sales in Greater Vancouver and the Greater Toronto Area, two of Canada’s most active and expensive housing markets. Excluding these two markets from the calculation cuts almost $113,000 from the national average price.”

Rishi Sondhi, Economist, TD Economics, said markets had a lot to contend with last month, including the implementation of the foreign buying ban and the anti-flipping tax. In addition, the Bank of Canada hiked rates by a cumulative 75 bps in December and January. As such, falling sales and prices last month are not much of a surprise.

“Moving forward, housing activity could bottom sometime in the first half of this year, supported by a solid job market, robust population growth and the likelihood that yields grind lower. Moreover, the level of new listings remains low, offering no signal (yet) that forced selling is meaningfully pushing up supply. The risk to the outlook is that regulators are looking to impose tighter lending standards on federally regulated financial institutions, a move that could weigh on housing demand,” he said.

Douglas Porter, Chief Economist, BMO Economics, said hope springs eternal that housing activity may be close to a bottom, “but we suspect that the market is still digesting the incredibly aggressive rate hikes of the past year.”

“After all, the Bank of Canada only began raising rates less than a year ago, with the latest volley just three weeks ago. And a persistently robust jobs market raises the risk that the rate-hike cycle is not quite done yet, especially if inflation proves more persistent than expected,” he said.

(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 worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario 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)