Canadian Housing Market: Have We Hit Bottom?

CRE firms in Canada are keeping their fingers crossed that statistics released last week by the Canadian Real Estate Association (CREA) signal that the housing market slump has hit bottom.

Home sales rose nationally in Canada by 1.3% in October, the first monthly gain since February. More importantly, the uptick happened across provinces, with about 60% of Canada’s regional housing markets seeing an increase in sales and the first rise in new listings in four months.

The news was immediately embraced by the CRE community, with online realtor Zoocasa suggesting the data is sign that the Canadian real estate market has adjusted to the higher cost of borrowing, with buyers and sellers who are “sick of sitting on the sidelines” making their way back into the market, according to a report in the Vancouver Sun.

The CREA, in a statement accompanying the release of the October sales data was a bit more understated.

“In October, sales across the county increased for the first time since before interest rates started to rise last winter. Of course, we’ve known the demand was there, so it’s just been a matter of some playing the waiting game as borrowing costs and prices have adjusted,” said Jill Oudil, CREA chair, in a statement.

Any way you put it, the hope is that Canada’s housing market has bottomed after plunging by 36% during the past seven months—and if the new numbers are not the beginning of the end of the downturn, they’re no doubt the end of the beginning.

“Canada’s housing market may be entering the latter stages of its cyclical downturn,” was the description issued by the economists at the Royal Bank of Canada (RBC), the Sun reported.

“The October housing data leaves us cautiously optimistic that the worst may be behind us, but the correction still has a way to go,” Randall Bartlett, Desjardins’ senior director of Canadian economics, said in a statement.

“If buyers interpret October’s results as the dip then this could mark the beginning of the end of the housing mark correction,” Scotiabank economist Farah Omran told the Sun.

According to CREA’s data, the frontrunner in the apparent turnaround was Victoria, where home sales rose nearly 20% in October; sales in Vancouver, Edmonton, Saskatoon, Winnipeg, Hamilton, Saint John and Halifax rose by single-digit percentages.

Sales in Toronto and Calgary were flat, while slight declines were reported in Ottawa (down 2.9%); Montreal (down 2.4%); and Quebec City (down 1.6%).

Home prices continued to dip, but last month’s drop was the smallest since May: the aggregate MLS Home Price Index was down 1.2% in October from the September level. The index is down 10% from its peak in February.

Prices in Ontario and British Columbia have seen the steepest declines, will some markets in Ontario reporting price drops of 22%, with 18% reductions in Canada’s westernmost province.

RBC is projecting that the price decline will continue until the end of Q1 2023. The wild card in these projection’s is Canada’s central bank and how long it will continue to raise interest rates like its US counterpart, the Fed.