Canada Housing Market Forecast: Will Prices Drop in Canada? – Norada Real Estate Investments

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Canada Housing Market

The Canadian housing market’s latest statistics indicate a promising shift towards stabilization. Stay informed with the latest updates in the Canadian real estate market. In this report, we analyze the key highlights, trends, and expert insights that provide a comprehensive view of the housing market. From fluctuations in home sales to price indices, we delve into the data that matters.

The Current State of the Canadian Housing Market

In November 2023, the Canadian housing market showed modest changes in national home sales, according to statistics released by the Canadian Real Estate Association (CREA). The data revealed that national home sales experienced a marginal 0.9% month-over-month decline. When compared to November 2022, the actual (not seasonally adjusted) monthly activity was 0.9% lower, indicating a stable but slightly subdued market.


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Newly Listed Properties and Market Dynamics

The number of newly listed properties also saw a decline, decreasing by 1.8% month-over-month. This trend, coupled with the marginal drop in home sales, suggests a cautious approach among both buyers and sellers in the current market. The MLS® Home Price Index (HPI) experienced a 1.1% month-over-month decrease but maintained a 0.6% year-over-year increase.

Insights from CREA and Market Observers

Larry Cerqua, Chair of CREA, expressed optimism about the market stabilizing in balanced territory, indicating a potential soft-landing scenario. He mentioned, “I wouldn’t expect anything too headline-grabbing from the resale housing market for the next few months,” emphasizing the importance of seeking guidance from a REALTOR® in the current scenario.

Shaun Cathcart, CREA’s Senior Economist, noted that while some buyers chose to step back until the spring, a surprising number of sellers attempted to list their properties this fall. With expectations of a more active spring market due to potential interest rate cuts, many sellers are now reconsidering their strategy and preparing for the coming year.

Market Indicators and Inventory Levels

The sales-to-new listings ratio tightened slightly to 49.8% in November, compared to 49.4% in October. This shift, the first since April, indicates a delicate balance between supply and demand. The months of inventory stood at 4.2 at the end of November, a slight increase from 4.1 in October but still below the long-term average of nearly five months.

Regional Housing Price Variations

The Aggregate Composite MLS® HPI declined by 1.1% month-over-month, reflecting softer market conditions since the end of the summer. Price declines were more prominent in Ontario, while other regions like Alberta, Saskatchewan, New Brunswick, Prince Edward Island, and Newfoundland and Labrador continued to see price increases. The actual national average home price was $646,134 in November 2023, marking a 2% year-over-year increase.

Are Home Prices Dropping in Canada?

While the Aggregate Composite MLS® HPI experienced a 1.1% month-over-month decline, it’s essential to note that this could be a response to softer market conditions rather than a significant drop in prices. Price declines are more evident in specific regions like Ontario, while other areas continue to see price increases. Overall, the market is experiencing variations, and it’s crucial for buyers and sellers to monitor regional trends.

Is Now a Good Time to Buy a House in Canada?

Given the current scenario of a balanced market and the anticipation of a potentially more active spring market, it could be a reasonable time for buyers to consider their options. The 2% year-over-year increase in the national average home price suggests a relatively stable market with moderate price growth. As always, consulting with a REALTOR® for personalized guidance based on individual circumstances is recommended.

ALSO READ: US Housing Market Predictions

Canada Housing Market Forecast: Will it Crash or Not?

For November 2023, the national average home price stands at $646,134. During this period, there were 35,013 home sales, reflecting a 16% increase year-over-year. Canada’s MLS Benchmark Price, representing the price of a “typical” home, was $735,500 in November 2023.

The decline in home prices in certain regions is attributed to the Bank of Canada’s rate hikes in June and July 2023, resulting in a cumulative rise in interest rates by 50 basis points. This increase has made borrowing more expensive, impacting the affordability of homes and subsequently reducing demand.

While there was no additional rate hike in November 2023, forecasts predict that relief from the current high rates may not be expected until early 2024.

Provincial Variances

Home prices remain higher year-over-year in all provinces except for Manitoba, where prices have experienced a decline. Monthly decreases in home prices are observed in seven provinces, indicating the impact of market dynamics on regional housing trends.

Market Dynamics: Seller’s or Buyer’s Markets?

Canada’s Sales-to-New-Listings Ratio (SNLR)

For November 2023, Canada’s SNLR stands at 49.8%, indicating a balanced market. A balanced market signifies equilibrium between buyer demand and property supply, fostering competition among buyers for available properties. This indicates that neither buyers nor sellers have a significant advantage, making it a more neutral market.

Provincial Insights

Alberta: The SNLR has increased from 74% to 77%, favoring sellers.

Saskatchewan: With an SNLR of 73%, the market continues to be in favor of sellers.

Manitoba: The SNLR has risen from 65% to 67%, reflecting a seller’s market.

Ontario: Moving away from a buyer’s market, Ontario’s SNLR increased from 37% to 44%.

Quebec: A positive shift is seen with the SNLR rising from 52% to 59%.

Nova Scotia: Experiencing a dramatic increase, the SNLR in Nova Scotia soared from 64% to 80%.

New Brunswick: A sharp rise from 77% to 91% indicates a strong seller’s market.

Newfoundland: With an increase from 67% to 81%, Newfoundland also demonstrates a strong seller’s market.

The majority of provinces currently exhibit a strong sellers’ market, pointing towards a higher demand for homes compared to the available listings. These market dynamics are indicative of the ongoing influence of interest rates on housing affordability and demand in Canada.

Benchmark Prices Across Canada (November 2023)

Examining benchmark home prices in the Canadian housing market for November 2023 reveals interesting trends, with variations on both a monthly and annual basis. Let’s delve into the specifics for each province:

British Columbia

With a benchmark price of $971,400, British Columbia observed a 1% monthly decrease but still marked a 4% annual increase.

Alberta

Alberta, with a benchmark home price of $486,200, showed a slight 0.1% monthly increase and a substantial 8% annual growth.

Saskatchewan

Saskatchewan, with a benchmark price of $324,400, experienced a 1% monthly reduction but held a 2% annual increase.

Ontario

Ontario’s housing market saw its benchmark price at $861,200, with a 2% monthly decline and a slight 0.5% annual decrease, making it the only province to see its benchmark price lower this month compared to last year.

Quebec

In Quebec, the benchmark home price stood at $466,000, with a 0.5% monthly decrease but managing a 4% annual growth.

Nova Scotia

Nova Scotia’s benchmark price of $390,000 reflected a 3% monthly reduction, yet it still achieved a 6% annual growth.

New Brunswick

New Brunswick presented a benchmark price of $287,900, with a 2% monthly decrease, contrasting with a 7% annual increase.

PEI

PEI, with a benchmark price of $361,800, recorded a 1% monthly decrease and a 4% annual increase.

Newfoundland

Finally, Newfoundland marked its benchmark price at $291,300, experiencing a slight 0.4% monthly contraction but maintaining a 4% annual growth.

Will the Canadian Housing Market Crash?

The current data does not suggest an imminent housing market crash. While some provinces have seen fluctuations, the majority still exhibit positive annual growth. Factors such as interest rates and economic conditions will play a crucial role in determining the market’s stability in the coming months.

Canadian Real Estate Bubble

The Canadian property bubble refers to a significant surge in Canadian real estate prices observed from 2002 to the present. Numerous observers have characterized this as a real estate bubble.

Contributing Factors to the Bubble

  • House prices outstripping incomes
  • Low interest rates since the 2008 financial crisis
  • Mortgage debt service ratio surging to shocking levels
  • Canadian homebuyers not having the same ability to lock in a long-term fixed rate mortgage
  • Canadian private debt as a % of GDP surpassing Japan’s during the peak of its crisis in the early 1990s
  • Canadian borrowers must renew their mortgages every five years
  • Provinces and cities responsible for land-use planning, zoning, and permitting
  • Real estate investors
  • Foreign buyers

Experts warn that Canada is potentially facing one of the largest housing bubbles of all time, with predictions of a 24% decline in Canadian home prices. However, there is optimism that 2024 will bring more stability to the housing market. The declining mortgage rates are expected to contribute to mostly flat home prices throughout 2024.

More Topics For Reading:

Housing Market Forecast 2024 & 2025: Predictions for Next 5 Years

Where Are Housing Prices Falling in 2022?

Is it a Good Time to Buy a House or Should Wait Until 2024 

Housing Affordability Crisis is Increasing in the United States

The Hottest Real Estate Markets of 2022


This article shouldn’t be used to make real estate or financial decisions. Some of this article’s information came from referenced websites. Norada Real Estate Investments provides no express or implied claims, warranties, or guarantees that the material is accurate, reliable, or current. All information should be validated using the below references. Norada Real Estate Investments does not predict the future Canadian housing market. Buying a property needs research, planning, and budgeting. Not all investments are good. Always do research and consult a real estate investment counselor.

Sources:

  • https://stats.crea.ca/en-CA/
  • https://wowa.ca/reports/canada-housing-market

This post was originally published on 3rd party site mentioned on the title of this site

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