Early Spring?
Canada’s housing market is gathering momentum into the end of the year, as cumulative interest rate cuts support activity and prices. We expect further increases in sales volumes and a moderate upward move in home prices nationally through 2025 as market conditions start to look and feel more ‘normal’—if there is such a thing in Canadian housing.
Existing home sales rose 2.8% in seasonally-adjusted terms in November, and were up a strong 26% from (still-low) year-ago levels. Sales volumes have now crept back above the 10-year average, and the market is clearing better with borrowing costs down and the stress test less onerous. New listings are still elevated and up 2.4% y/y, but inventory is getting cleared. The months’ supply of homes for sale on the market fell again to 3.7 in November alongside a tighter sales-to-new listings ratio—the latter is firmly in balanced territory at 59.2%.
Balanced overall market conditions leave price trends stable, although the MLS benchmark price showed some firmness in November, rising 0.6%. That’s the strongest monthly gain since July 2023. From a year ago, prices are still down 1.2% y/y. A very soft landing that might now be coming off the floor.
Market conditions continue to vary by region and segment, but most are tightening. In fact, no outright buyers’ markets remain among 23 major cities we track. The Prairies and much of Atlantic Canada continue to stand out with the tightest markets in Canada. Edmonton, Regina and Winnipeg all sport strong sellers’ markets even as Calgary has softened somewhat. Montreal is strong; Vancouver remains well-balanced; and much of Southern Ontario has tightened back into balanced territory. Toronto remains an interesting case, where condo supply continues to saturate the market, even as scarcer single-detached housing has tempered the deterioration in the overall numbers. Condo prices in Toronto are now down 5.0% y/y, while single-detached prices are flat.
Housing starts (in a separate release) jumped to 262k annualized units in November, marking a third straight month of rising activity heading into the end of the year. Multi-unit starts rebounded off lower levels, while single-family starts have been creeping higher. In a nutshell, building activity remains impressively resilient despite the past tightening cycle, higher input costs and a run of depressed sales. Granted, activity has fallen well off from levels seen in recent years, with the 12-month average sitting at 246k versus a high of 273k in late 2021. But, activity indeed seems to have stabilized just above 240k—sturdy and rising purpose-built rental construction is filling in the void left by the owner/investor condo segment. Next year will be an interesting push/pull, with lower interest rates and improved market conditions potentially offset by a sharp reduction in population growth. We look for overall housing starts to step back, but not by much.
Recent Reports of Interest.
What Canada’s Immigration Shift Will and Will Not Do: Ottawa’s dramatic about-turn on immigration will turn Canada’s 3%+ population growth to near-zero in coming years.
Canada’s Housing Market in Charts: A chart-based tour of the market, and where it might be headed.
Mortgage Rules and Rates: The 3.9% Solution? Mortgage-rule changes will incrementally bolster demand.
Pathways to Affordability for Canada’s Housing Market: You would need to go back to the era of double-digit mortgage rates in the early 1990s to see the last time buying a home in Canada was as expensive as it is today. Is there a route back to affordability and, if so, how long will it take?
Extraordinary Population Delusions and the Trouble with Crowds: The narratives around the population boom have, in our view, been off the mark. Here are five things worth challenging.
Housing Outlook 2024: Laying the Floor: The Canadian housing market should enter a period of overall stability this year, with lower resale prices and easing mortgage rates.
Real Estate Investment: The Good, the Bad and the Implications: Does real estate investment make sense at this stage of the cycle? And if not, what are some implications?