For the third straight month, Canadian home sales have declined as the Canadian Real Estate Association (CREA) reports a 1.9% drop in real estate activity from August to September.
And because of the recent slump in sales, for the second time this year, CREA is downgrading its forecast of how many homes will trade hands in Canada this year.
So, what does this mean for Canadian home buyers, sellers and owners?
Yes, home sales are down, but new listings have surged over the past several months. The number of newly listed homes jumped 6.3% on a month-over-month basis in September, making for a cumulative gain of about 35% from 20-year lows reached back in March.
With sales trending down and new listings trending up, you’d normally have the makings for a buyer’s market. However, uncertainty with interest rates—not to mention a crunch on housing supply—is adding strain to would-be buyers.
“What happens next will depend on interest rates. Whether that means uncertainty about the possibility of further hikes, or just the cost of borrowing money right now, neither of these will be resolved for would-be buyers anytime soon,” said Senior Economist Shaun Cathcart, as quoted in CREA’s latest media release. “As such, expect a quieter than normal winter with all eyes on the Bank of Canada. We’ll see how buyers are feeling when the snow starts to melt.”
Sellers may also choose to play the wait-and-see game until early next year, especially as we shift into what’s traditionally a slower season for real estate activity.
For the first time since March, the Aggregate Composite MLS® Home Price Index (HPI)—CREA’s most advanced and accurate tool to gauge a neighbourhood’s home price levels and trends—was down month-over-month. That figure dropped 0.3% from August to September.
CREA mentioned the small dip is a result of trends in Ontario as prices are still slowly rising in other provinces.
The actual (not seasonally adjusted) national average sale price was $655,507 in September.
Using the latest data available from real estate boards and associations across Canada, CREA revised its forecast for home sales activity and average home prices.
About 450,000 residential properties are predicted to be sold this year, a decline of 9.8% from 2022. The average national price is expected to be $680,686, a decline of 3.3% from last year. In July, CREA had predicted a 6.8% decline in sales and a 0.2% drop in the average price.
The further reductions come as a result of softer market conditions going forward and “higher for longer” interest rates.
CREA did report home sales are forecast to rebound by 9% in 2024 as interest rates cool, and home prices should regain a modest 1.5% in 2024.
“Despite a lot of monthly volatility, this forecast would actually mark the fourth year in a row that the annual national average price has remained in the $680,000-$700,000 range,” CREA said in its release.
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