Housing market goes into 'hibernation' with lower sales, listings, and flat prices

CEO Khai Intela
The Canadian housing market is experiencing a slowdown earlier than expected this year, according to the Canadian Real Estate Association (CREA). The latest data for October reveals a decline in sales, fewer new listings, and...

The Canadian housing market is experiencing a slowdown earlier than expected this year, according to the Canadian Real Estate Association (CREA). The latest data for October reveals a decline in sales, fewer new listings, and stagnant prices. As we enter the colder months, the housing market typically slows down, but this year, the decline has been more pronounced.

A Sluggish Market

In October, home sales on CREA's Multiple Listing Service dropped by 5.6% compared to the previous month. Moreover, there were fewer homes being sold, and even fewer new listings hitting the market. New listings saw a decline of 2.3%, marking the first decrease since March. Larry Cerqua, President of CREA, remarks, "We're only in November, but it appears many would-be home buyers have already gone into hibernation." He also notes that some sellers may be postponing their plans until spring.

Unusual Decline

Although October is traditionally a slower month for the housing market, this year's decline has been more substantial. The volume of home sales is currently 17% below pre-pandemic levels, according to TD Bank economist Rishi Sondhi. Sondhi attributes this decline to high-interest rates and states that "sales are hanging around levels last recorded over 20 years ago" on a per capita basis.

The slowdown in sales predominantly stems from Canada's major cities. Vancouver saw a 10% decrease in activity, while Victoria and Calgary experienced declines of 13% and 9%, respectively. Ottawa, Toronto, and Montreal also reported declines of 11%, 5%, and 10%.

Prices Holding Steady

Despite the decline in sales, housing prices have remained relatively stable. The average selling price for a home in October was $656,625, a slight increase from September and a 1.8% rise from last year. However, CREA cautions against relying solely on this average, as it can be skewed by larger markets like Toronto and Vancouver.

CREA suggests using the House Price Index (HPI) as a better indicator, as it adjusts for the type and number of homes sold. In October, the HPI declined by 0.8%, but it remains 1.1% higher compared to the previous year.

Rishi Sondhi anticipates a buyer's market in Ontario and British Columbia due to a low sales-to-new-listing ratio. He predicts that prices in these markets will decrease in the coming months, but expects some relief next year as the Bank of Canada begins to lower interest rates.

While overall prices have been relatively stagnant, certain regions are experiencing significant price increases. Calgary's housing market remains robust, with benchmark prices rising by 9.4% in the past year. Atlantic Canada also sees a surge in prices due to increased demand caused by the region's affordability. Moncton and Halifax have experienced price increases of 12% and over 9%, respectively.

The Canadian housing market may be entering a period of hibernation, but it's important to remember that these fluctuations are part of a seasonal trend. As we move into the colder months, the market is expected to pick up again in the spring and summer.

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