Canadian existing home sales fell 3.1% from the prior month in February, in seasonally adjusted terms, suggesting that it's not going to be a one-way trip north for housing activity from last year's soggy levels. True, the volume of sales was a solid 19.7% above year-ago levels, but the first two months of 2023 marked the slowest pace in the past decade (aside from the 2020 pandemic spring shutdown)—so it is an easy comparison. Bigger picture, sales last month were about 6% below the 10-year average.
While sales were pulling back a tad after a nice turn-of-the-year bounce, new listings perked up 1.6% m/m and are also up solidly from soft year-ago levels (+24%). Similar to sales, listings are still below the long-run average, thus keeping the sales-to-new-listings rate close to balance. The ratio dipped slightly in February to 55.6%, almost right in the middle of what's viewed as a normal range (45% to 65%).
Given that generally balanced demand/supply picture, it's thus little surprise that prices are largely stable. The MLS HPI was flat on a month-to-month basis, at least snapping a five-month declining streak, and nudging them up 0.8% y/y. This still left prices down 14% from the peak hit precisely two years ago—i.e., pretty much at the moment before the Bank of Canada first began hiking rates. CREA did make a big deal about the fact that, in a single month, prices went from falling 1.3% m/m in January to holding steady in February; that is the fourth largest positive shift in the past 15 years. Not meaning to curb the enthusiasm, but the end result of a flat month-to-month move on prices is unlikely to quicken many pulses.
Unadjusted for changes in the mix and quality, average transaction prices were up 3.5% y/y, led by double-digit gains in the two big Alberta cities. In fact, prices in Calgary have risen by almost 13% over the past two years—since interest rates began to rise—absolutely running against the grain in most of the rest of the country. Prices in most cities have largely stabilized in the past year, and few are now down year-on-year (only 3 of the 25 largest). Still, Southern Ontario remains cluttered with cities reporting drops of 20%-to-25% from the peaks hit two years ago.
Bottom Line: Despite the mild loosening in conditions last month (sales down, listings up), prices stabilized in February after a five-month skid. 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.