Canadian existing home sales rose 3.7% in January (seasonally adjusted) and were up a hefty 22.0% from the same month last year. Activity has firmed, but part of the big gain is the result of an easy year-ago comparison (when activity was in the pit of the correction). It’s also worth reminding that this is Canada: we have winter, and it can be variable and messy. Activity in the December/January period is the least liquid of the year, with sales usually running well below half of peak spring volumes. So we’ll really need to see how the numbers start to look in March and beyond. So far, there remain encouraging signs that the market has troughed alongside improved sentiment and some lower fixed mortgage rates—and there is pent-up demand on the sidelines.
New listings rose a more modest 1.5% in January and were up a 10.5% y/y. This has allowed the sales-to-new listings ratio to rise further to 58.8%, which just happens to be bang on the 10- and 20-year medians. In other words, we’re almost seeing a perfectly balanced resale market again when looking at the aggregate Canadian numbers. Regionally, there is variation of course, with the Prairies (especially Calgary) boasting sellers’ markets, while a scattering of smaller Southern Ontario cities remain relatively soft (although tightening from last fall). Cottage country in Ontario and B.C. also remains very soggy (though this is far from peak season). The big cities look relatively balanced again, with Vancouver, Toronto and Montreal carrying neutral sales-to-new listings ratios. Again, with spring also comes more listings, so we’ll need to see how much pent-up demand is waiting to swallow up (or not) the flow that will be coming in the next few months. But the starting point for the market is at least well balanced.
Prices continue to fall across a number of markets, with the MLS benchmark Canadian price down 1.2% in January, or 13.8% annualized, consistent with moves seen since October. Perhaps the market is clearing better because sellers are more willingly relenting on price. That leaves prices up just 0.4% from a year ago. The average transactions price was up 7.6% y/y in January. At 10% y/y, Calgary is posting the strongest price numbers among the larger cities, Vancouver and Montreal are in the low-single digits, Toronto is flat, and parts of Southern Ontario are down. Many of those latter markets are still seeing prices at cycle lows.
The Bottom Line: 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.
Bonus: If you missed it, our 2024 housing market outlook can be found here.