The Housing Market Calm Before … Next Year

On Thursday, December 14, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of November 2023. Below, CREA’s Senior Economist Shaun Cathcart provides an update on the current state of housing markets in Canada and explains what the data means for members:

Good news everyone!

It looks like the start of the turnaround, or at least stabilization, in market conditions we first saw in October will continue into 2024.

Sales pretty much stopped falling in November. They were down less than 1% from October, which was the smallest decline since July.

Also, new listings fell again by about 2% month-over-month in November, similar to the decline posted in October. Looking at data for the first half of December, there’s a good chance this trend will continue to finish out the year.

I’ve been around long enough to have seen a number of policy moves send buyers to the sidelines partway through a year. The Bank of Canada hiking rates again in June and July was one of these. As such, it was clear from roughly August that many buyers had already gone into hibernation until at least the spring of 2024.

However, that didn’t stop sellers from coming out in large numbers after Labour Day to try their luck this fall. New listings jumped almost 6% from August to September.

But, September was the peak for new listings. Since then, with so few players taking the field on the buyer side of things, sellers are increasingly picking up their ball and going home.

So, it was a year where buyers rushed off the sidelines into the spring market with few sellers, followed by a surge in listings into a fall market with few buyers. They were able to come together in May, June and July – but it was like ships passing in the night.

If you think back to September, since we already knew the buyers were going to be MIA for at least another six months, seeing a flood of listings pop up like that was a little concerning. After all, with rates being as high as they are, there are obviously worries out there that we might see some people have to sell their homes.

That’s why the winding down of new listings the last couple of months is good news. It looks like we’re going to stabilize at about a 50% sales-to-new listings ratio and a little over four months of inventory – not what we’ve been used to the last few years, but historically quite balanced.

With demand on pause the best-case scenario is that supply is willing and able to do the same. Now we play the waiting game.

Waiting for what you ask? Well, we’ve already been forecasting since the beginning of 2023 that this year would be the bottom for sales, and that 2024 would mark the start of a recovery. We had to revise the numbers downwards after the summer rate hikes, but the recovery year story has remained the same.

We won’t be updating our forecast again until January, but we’re already thinking about what that might look like. Think about what demand did this past spring when prices stopped falling and interest rates stopped rising. It didn’t last long, but we got a glimpse of what demand might look like.

Now think about how 2024 is expected to see the true beginning of a rate cutting cycle, one that may begin sooner and be steeper than we thought not so long ago, according to market expectations. Demand has also had another year to build under the surface.

Nothing is carved in stone and circumstances can change, but it feels like it could be a more active spring market than many seem to think. One thing I’ve seen in my career is that the Canadian housing market really does have a habit – and long track record at this point – of surprising everybody on the high side.

As our Director and Senior Economist, Housing Data and Market Analysis, Shaun Cathcart provides housing market intelligence to Boards, Associations, members, and real estate industry stakeholders. He spends much of his time analyzing and writing about Canadian housing trends. In his downtime, you can find him on his bike, on the volleyball court, and enjoying time with his family.

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