Signs of Recovery in Canada’s Housing Market

Following a weak second half of 2023, home sales over the last two months are up, according to the latest data from the Canadian Real Estate Association (CREA).

Home sales activity recorded over Canadian MLS systems rose 3.7 per cent between December 2023 and this past January, building on the 7.9 per cent month-over-month increase recorded in November 2023. While activity is now back on par with 2023’s relatively stronger months recorded over the spring and summer, it begins 2024 about nine per cent below the 10-year average.

“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,” says CREA’s senior economist Shaun Cathcart. “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.”

National gains were once again led by the Greater Toronto Area, along with Hamilton-Burlington, Montreal, Greater Vancouver and the Fraser Valley, Calgary and most markets in Ontario’s Greater Golden Horseshoe and cottage country.

The actual (not seasonally adjusted) number of transactions came in 22 per cent above January 2023, the largest year-over-year gain since May 2021. That said, with current activity still running at below-average levels, the double-digit gain was more reflective of the base effect from the comparison to January 2023, which was the worst start to almost any year in the past two decades.

The number of newly listed homes edged up 1.5 per cent on a month-over-month basis in January, although it remains close to the lowest level since last June.

“The market has been showing some early signs of life over the last couple of months, probably no surprise given how much pent-up demand is out there,” says CREA chair Larry Cerqua. “There’s a consensus the market will probably look quite a bit different this year compared to 2022 and 2023.”

With sales up by more than new listings in January, the national sales-to-new listings ratio tightened further to 58.8 per cent compared to under 50 per cent just three months earlier. A sales-to-new listings ratio between 45 per cent and 65 per cent is generally consistent with balanced housing market conditions, with readings above and below this range indicating sellers’ and buyers’ markets, respectively.

There were 3.7 months of inventory on a national basis at the end of January, 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.

Price declines of late have been predominantly located in Ontario markets, particularly the Greater Golden Horseshoe and, to a lesser extent, British Columbia. Elsewhere in Canada, prices are mostly holding firm or in some cases like in Alberta and Newfoundland and Labrador continuing to climb.

The actual (not seasonally adjusted) national average home price was $659,395 in January, up 7.6 per cent from the same month last year.

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