Canadian home sales significantly down in November compared to last year

Home sales recorded over Canadian MLS Systems fell by 3.3% between October and November, more than erasing October’s
small gain and rejoining the moderating sales trend that began back in February, reported the Canadian Real Estate Association on Thursday.

The number of transactions in November came in 38.9 per cent below a near-record for that month last year and stood about 13 per cent below the pre-COVID-19 10-year average for November sales.

“There were no big surprises in the November housing numbers, with the data showing the same trends of lower sales and moderating prices we’ve been seeing for a number of months now,” said Jill Oudil, Chair of CREA. “That said, while the interest rate situation facing buyers is unlikely to improve over the first half of 2023, it is more likely to remain the same. However, it may also be the first spring market in a number of years where buyers have a shot at not being out-competed for properties that catch their eye.”

“November’s housing data from across Canada came in as expected – still pretty quiet – and that is unlikely to improve this
winter with the Bank of Canada raising rates again last week,” said Shaun Cathcart, CREA’s Senior Economist. “It will be interesting to see what buyers do when listings start to come out in big numbers in the spring, and even more interesting to see what happens a little later when the Bank of Canada, now widely thought to be at or very near the top of its tightening
cycle, starts to eventually cut rates. All the other fundamental factors needed for the market to take off again are still out there.”

CREA said about 60 per cent of all local markets saw lower sales in November, led by Greater Vancouver and the
Fraser Valley, Edmonton, the Greater Toronto Area (GTA) and Montreal.

The number of newly listed homes edged down 1.3 per cent on a month-over-month basis in November, it added.

“With sales down month-over-month by a little more than new listings in November, the sales-to-new listings ratio eased
back to 49.9 per cent compared to 50.9 per cent in October. The ratio has remained close to around 50 per cent since May. The long-term average for this measure is 55.1 per cent,” said CREA.

“Based on a comparison of sales-to-new listings ratio with long-term averages, about 70 per cent of local markets are currently in balanced market territory. There were 4.2 months of inventory on a national basis at the end of November 2022. This is close to where this measure
was in the months leading up to the initial COVID-19 lockdowns, and still nearly a full month below its long-term average.”

CREA said the Aggregate Composite MLS Home Price Index (HPI) edged down 1.4 per cent on a month-over-month basis in November, continuing the trend that began back in the spring. The Aggregate Composite MLS HPI now sits about 11.5 per cent below its peak level.

The national average home price was $632,802 in November, down 12 per cent from the same month last
year. The national average price is heavily influenced by sales in Greater Vancouver and the GTA, two of Canada’s most active and expensive housing markets. Excluding these two markets from the calculation cuts more than $123,000 from the national average price, added CREA.

Rishi Sondhi, Economist with TD Economics, said demand continues to decline under the weight of rising interest rates. Recall that in late October, the Bank of Canada pushed its policy rate 50 bps higher.

“They followed up with another hike of the same magnitude in December, and we think they’ll move their rate slightly higher early next year. All of this points to continued sales declines in the coming months. Weaker sales activity should push prices even lower in the near-term. However, our forecast calls for average prices to only partially retrace their pre-pandemic gain when they eventually bottom. An unanticipated surge in resale supply would undermine this view, but so far the rate at which new listings are hitting the market has been subdued.”