Prices are stabilizing, but activity is still down
Canada’s housing market is facing a “bumpy recovery” amid rate cut expectations and stalled activity.
According to Robert Hogue, assistant chief economist at RBC, the anticipation of potential rate cuts by the Bank of Canada has put a temporary halt to the consistent decline in housing prices witnessed since the previous summer.
However, this optimism has not yet translated into an increase in market activity, largely due to the affordability challenges that emerged during the pandemic.
“We think February’s developments point to a bumpy ride for the market in the months ahead,” said Hogue. “While the tightening of demand-supply conditions since December has paved the way for modest price appreciation, resales are likely to bounce around amid a standoff between buyers and sellers.”
Home resale trends vary across regions
Home resales across Canada decreased by 3.1% from January to February, undoing roughly a quarter of the 12.7% increase seen in the preceding two months.
With February’s seasonally adjusted and annualized sales figures at 461,000 units, the market has remained 11% below the 10-year average.
This decline was notably prevalent in provinces west of Quebec, with significant drops observed in Toronto (-12.0% m/m) led the way, followed by Kitchener-Waterloo (-10.8%), the Fraser Valley (-10.3%), Vancouver (-7.3%) and Calgary (-6.6%).
Conversely Montreal (+6.1%), Quebec City (+5.3%), Saint John (+12.4%) and Fredericton (+27%) experienced increases in home resales.
And despite a slight decrease in activity in Calgary, home resales in the city continued to exceed pre-pandemic levels by over 60%.
Sellers regain confidence to enter market
Meanwhile, new listings were up for the second consecutive month, indicating a growing confidence among sellers about the market’s prospects.
Hogue said some of these sellers may be those who opted out of selling in the fall and instead chose to enter the market in the spring.
This uptick in listings may have also contributed to the higher transaction volumes observed in Montreal and Quebec City, but it had limited impact elsewhere in the country.
Additionally, the supply of new listings remained below the peak levels observed last summer.
Home prices are stabilizing
As for home price trends, Hogue said that the national composite MLS Home Price Index benchmark remaining steady at $719,400 in February, marking the first month without a decline since August.
This stabilization, coupled with the rebalanced demand-supply conditions, suggests that prices might have reached a turning point on a national level, though local market conditions still vary.
Declining trends were still observed in some BC and Ontario markets, including Victoria, the Fraser Valley, Ottawa, Cambridge, Kitchener-Waterloo, Windsor and Barrie.
According to Hogue, the MLS HPI remained unchanged in Vancouver, while Toronto saw a slight increase of 0.2% month-over-month.
As for markets that saw upward prices movements, like Calgary and Edmonton, February data did not show any significant growth. Saskatoon, however, stood out as an exception with a 2.5% increase.
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