Following a weak second half of 2023, home sales over the last two months are showing signs of recovery, according to the latest data from the Canadian Real Estate Association (CREA) released on Wednesday.
The national association said home sales activity recorded over Canadian MLS Systems rose 3.7% between December 2023 and January 2024, building on the 7.9% month-over-month increase recorded the month prior. While activity is now back on par with 2023’s relatively stronger months recorded over the spring and summer, it begins 2024 about 9% below the 10-year average, it said.
“Sales are up, market conditions have tightened quite a bit, and there has been anecdotal evidence of renewed competition among buyers; however, in areas where sales have shot up most over the last two months, prices are still trending lower. Taken together, these trends suggest a market that is starting to turn a corner but is still working through the weakness of the last two years,” said Shaun Cathcart, CREA’s Senior Economist.
CREA said MLS sales were 22% above January 2023. The MLS Home Price Index (HPI) fell by 1.2% month-over-month but was still up 0.4% year-over-year.
The number of transactions in January was the largest year-over-year gain since May 2021.
CREA said there were 3.7 months of inventory on a national basis at the end of January 2024, down from 3.8 months at the end of December and 4.1 months at the end of November. The long-term average is about five months of inventory.
The national average home price was $659,395 in January 2024, up 7.6% from January 2023.
“The Canadian housing market looks balanced overall, but keep in mind that this is the depth of winter. We’ll see how pent-up demand and more listings interact once spring breaks. For now, market sentiment has been buoyed by the prospect of Bank of Canada rate cuts and helped by a drop in fixed mortgage rates. That said, market pricing for Bank of Canada easing continues to get pushed out (we believe around mid-year, not in time for the spring market), while 5-year GoC yields have quietly risen by more than 50 bps since the start of the year,” said Robert Kavcic, Senior Economist at BMO Capital Markets.
Rishi Sondhi, Economist with TD Economics, said January’s decent sales result was likely supported by favourable weather, and with it being a low volume sales month, some caution is normally warranted when interpreting the results.
“That said, while we had expected Canadian home sales to increase in the first quarter (supported by falling bond yields), they are on track to exceed our forecast by a considerable margin. Ontario has been the real driver of the upside surprise, with the release of pent-up demand shifting markets very quickly from favouring buyers to being more balanced. Looking to this month, the key Canadian 5-year bond yield has backed up by about 50 basis points (bps) since early January, which could sap some steam from demand,” said Sondhi.
“Home prices are not sending the same signal of strength as sales are, with only a modest gain in average prices and a decline in benchmark prices in January. This is primarily an Ontario and B.C. story, as sales are up 23% and 14%, respectively in these markets since October, but average home prices are down 2% and flat, respectively. Our take on this dichotomy is that sellers capitulated on their asking price to move their homes, as conditions in these markets previously favoured buyers. Moving forward, Canadian average home price growth is likely to continue to rise amid tighter supply/demand balances, although severe affordability deteriorations in several markets across Canada should limit the potential for runaway price growth.”
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
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