Canadian Housing Market Overview

The Canadian Real Estate Association (CREA) reports a remarkable 26% increase in home sales across Canada in November compared to the previous year, continuing a trend of substantial year-over-year gains for the second consecutive month. A total of 37,855 homes were sold last month, a sharp rise from 30,042 homes in November 2023, following a staggering 30% surge in sales in October.

Impact of Interest Rate Reduction

“Consumer confidence is slowly returning to the marketplace,” stated Mike Heddle, a broker from Royal LePage State Realty in Hamilton, Ontario. The recent reduction in the Bank of Canada's interest rate policy has contributed to this renewed confidence, especially among first-time and 'move-up' buyers seeking to capitalize on the favorable conditions.

The Bank of Canada has slashed its policy rate by half a percentage point, marking the fifth consecutive reduction since June, now standing at 3.25%. This shift in interest rates has stimulated housing activity, particularly in major markets like Greater Vancouver, Calgary, Greater Toronto, and Montreal, along with several smaller cities in Alberta and Ontario.

Price Trends in the Market

Nationally, the average sale price of homes for November rose by an impressive 7.4% from the previous year, reaching $694,411. Shaun Cathcart, a senior economist with CREA, noted that not only are sales increasing, but market conditions are also tightening, leading to a significant uptick in prices at the national level for the first time in nearly a year and a half.

Winter Market Outlook

Interestingly, while many might expect a seasonal pause before the spring market, “the Bank of Canada's latest cut combined with relaxed mortgage rules could spur an unusually active winter market,” Cathcart added.

Sales and Listings Data

On a month-over-month basis, seasonally adjusted national home sales increased by 2.8% from October. However, the number of newly listed properties experienced a slight decline of 0.5%. By the end of November, just over 160,000 properties were available for sale across the country, an 8.9% increase from the previous year but still below historical averages for this time of year.

Buyer Sentiment and Predictions

According to Heddle, there's a noticeable upswing in buyer sentiment recently, although challenges remain, primarily concerning affordability. Clay Jarvis, a spokesperson for NerdWallet Canada, mentioned that potential buyers are eager to act on lower variable rates and increased inventory. “They’re seizing the moment before the market heats up,” he said.

Jarvis predicts a competitive spring season and suggests that some buyers might have chosen to enter the market last month to sidestep potential price hikes next year due to increased demand. “While their mortgage may be slightly pricier now, many are willing to make that trade-off, viewing it as an opportunity cost,” he remarked.

Conclusion

As the year draws to a close, the Canadian housing market is poised to finish on a high note. While it might not revert to the frenzied pace experienced in December 2021, significant sales increases compared to the previous year are expected, marking a hopeful trend for the incoming year.