The Canadian economy might not be doing great, but cheaper credit was enough for the real estate market. Canadian Real Estate Association (CREA) data shows the price of a composite benchmark, or typical, home was unchanged in November. No movement is good when it comes to higher prices, as rising sentiment helped to spark enough demand to stop price erosion. The improved sentiment comes after rate cuts and state-backed buyer stimulus helps to motivate buyers. However it’s worth remembering that small buyer surges have occurred multiple times over the past couple of years, only to fade shortly after.
Have Canadian Real Estate Prices Found A Bottom?
The price of a composite benchmark (“typical”) home across Canada, in Canadian dollars.
Source: CREA; Better Dwelling.
The price of a typical home barely budged last month. The composite benchmark slipped 0.1% (-$600) to $707,100 in November, about 1.2% ($8,400) lower than last year. That’s barely budging in the context of Canadian real estate.
Canadian Real Estate Prices Aren’t Budging
The annual price change for a composite benchmark (“typical”) home across Canada, in percentage points.
Source: CREA; Better Dwelling.
Over the past few months, the market has generally been firming and settling on a lower bound. The 12-month change has improved for 4 consecutive months, and is now at the smallest annual gap since April. It’s not growth, but it’s not much of a loss either.
That said, this still isn’t a walk in the park for those who purchased at the market peak. The composite benchmark is still 17% (-$144,900) lower than the record high reached in March 2022. It may not be affordable, but that was a substantial pullback.
Canadian Home Buyers Motivated By Credit, Fundamentals Erode
Heading into the winter, market activity traditionally slows down—though that wasn’t the case for buyers. Buying activity improved while sellers pulled back slightly. The result is a balanced sales to new listings ratio (SNLR) of 59%, just on the cusp of overheating. Increased demand is believed to be a combination of pent-up demand, aggressive rate cuts, and state-backed buyer stimulus that starts this week.
It’s always tricky to figure out if a sentiment-driven rally has staying power. When emotions drive purchasing, a quick spike in buying can fade just as quickly. We’ve seen this occur several times over the past few months, almost always ahead of rate cuts, only to fade shortly afterward.
Meanwhile, the erosion of several fundamental factors are being largely dismissed. A sharp rise in unemployment and a controlled population shrinkage are both factors that typically work against price growth. Though cheap credit beats fundamentals every time.
How many “adjustments” to the HPI did they have to make this time to halt declines? Wasn’t it just a few months ago that Oxford Economics said they weren’t going to use it because they basically just modeled out the declines?
Not many buyers but the buyers on the market are convinced there’s going to be a flood of demand soon, based solely on investors getting 30 year mortgages.
Ding dong, the witch is dead. But her evil legacy of screwing millennials will last forever!
Prices need to adjust to below American prices. Canada economy is not a big, strong, as America. America prices are far below Canadian values. Canada government doing all it can to keep elevated prices. I am sorry, pain is required, for real estate normalization. Maybe Trump is the guy, whom going to cause pain for Canada GDP (Via Tariff guy). Expect major consequences over next 10 Years. Liberals ( all the eastern provinces whom elected the liberals), are solely responsible for the escalating national debt. Divided the nation. We are pointing fingers at everyone East of Hamilton.
If inventory is rising prices must be falling .All the statistics the real estate boards are manufacturing to show prices are not falling are meaningless. Basic economy 101, the more products available the lower the price.