The number of homes sold in Canada last month ticked up on an annual basis but fell 5.6 per cent compared with September as the Canadian Real Estate Association says both buyers and sellers appear to be holding off for the time being.
“We’re only in November, but it appears many would-be home buyers have already gone into hibernation,” said CREA chair Larry Cerqua in a press release on Wednesday.
“The October numbers also revealed some sellers may be shelving their plans until next spring."
There were 33,921 homes sold in Canada in October, up 0.9 per cent compared with the same month last year.
The national average home price rose 1.8 per cent year-over-year to $656,625.
The association said while average home price declines are still uncommon throughout most of Canada's major cities — mainly occurring in certain Ontario regions such as Windsor-Essex and the London area — some regions of B.C. are now also starting to see softening.
TD economist Rishi Sondhi said current conditions "very much favour buyers in B.C. and Ontario," with indications that "prices will head lower in these two markets over the next several months, dragging down the nation-wide average price."
"Unsurprisingly, high interest rates continued to weigh on home sales last month. Notably, per capita sales are hanging around levels last recorded over 20 years ago," Sondhi said in a note.
Sales decreases were recorded in nine of the 10 provinces, with New Brunswick the lone exception, noted National Bank of Canada economist Daren King.
"With the growing impact of higher interest rates that affect affordability negatively and the slowing labour market, the activity on the real estate market should remain subdue in the months ahead," King said in a note.
"However, the record demographic growth we are currently experiencing in the country should prevent a significant drop in activity."
New listings across Canada fell 2.3 per cent from September, marking the first decline since March. The national sales-to-new listings ratio fell to a 10-year low of 49.5 per cent, compared with the long-term average of 55.1 per cent for this measure.
"It's been an adjustment for the marketplace back to a normal real estate cycle," Christopher Alexander, president of Re/Max Canada, said in an interview.
"You have a lot of people that are listing now that were holding on, expecting rates to have come down by now and they didn't, and so some people have been forced to make a decision. But despite all that, properties are still selling. It's just, they're taking longer than what we're used to," he said.
CREA senior economist Shaun Cathcart said the prospects of sales activity picking up next year comes down to whether the Bank of Canada will eventually be ready to start cutting its key interest rate.
“We know housing demand is extremely high all across the country, but October’s resale data was further confirmation that it probably won’t be manifesting itself in the existing home market for the remainder of this year and likely not until spring 2024 at the earliest,” Cathcart said in a news release.
The Bank of Canada has aggressively raised interest rates over the past year and a half, taking its key rate target from 0.25 per cent to five per cent — the highest it’s been since 2001. The hikes were aimed at bringing down inflation after a rapid run-up in prices post-pandemic.
Last week, a central bank official warned interest rates might not return to the low levels people were used to before 2020 and that higher levels of government debt and geopolitical risks could also push rates higher.
While the high interest rate environment is making it more expensive to purchase a home, Alexander said buyers still have options.
"The savvy buyer is looking at taking a shorter-term mortgage that will cost you a little more in the short term, but in a year from now to two years, it's highly likely that rates will be much lower than they are today," he said.
"But there's still a lot of people that are trying to make the numbers work and because of the level of price appreciation we've seen and the current interest rate levels, affordability is a real challenge."
This report by The Canadian Press was first published Nov. 15, 2023.