In an unexpected turn of events, the Canadian housing market witnessed a significant upsurge as the year drew close, a phenomenon observed by the National Real Estate Association. This sudden increase in home sales during December has sparked a debate among experts about the sustainability of this growth.
The Canadian Real Estate Association (CREA) reported a notable 8.7% rise in home sales in December compared to November, aligning the year’s end with the typically active spring and summer months. However, CREA’s senior economist, Shaun Cathcart, cautioned against viewing this as a sign of a market rebound. He suggested that the increase might be due to buyers and sellers, who had previously held unrealistic price expectations, finally agreeing on deals before the year’s end.
Cathcart mentioned that while a recovery in housing demand is anticipated in 2024, it’s still too early to determine its exact nature. Doug Porter, BMO’s chief economist, attributed the December surge partly to warmer weather and a decrease in long-term borrowing costs, influenced by expected rate cuts from the Bank of Canada in 2024.
Factors Influencing the Market Uptick
Several elements contributed to this surge. Declining bond yields, anticipating rate cuts in 2024, led to a reduction in fixed mortgage rates. This, in turn, may have encouraged some buyers to finalize purchases before the year ended, to benefit from the projected market boom in 2024, according to Cailey Heaps, president of a Toronto real estate team.
Despite high borrowing costs, with the central bank’s key rate at 5%, those seeking to buy homes at this time might find favorable deals due to lower demand and reduced competition. The sales-to-new listings ratio, a crucial market indicator, rose to 57.8% in December from just over 50% in November, suggesting a shift towards a seller’s market.
Year-over-year, December saw a 3.7% increase in home sales volume. However, reflecting on 2023, there was an 11.1% decline in home sales from the previous year, marking the lowest annual level since 2008, following the Bank of Canada’s interest rate tightening cycle.
2024 Real Estate Outlook
Looking ahead, CREA updated its 2024 housing forecast, predicting a 10.4% rise in residential property sales and a 2.3% increase in the national average home price. However, the true resilience of the market will be tested in the spring, as per CREA chair Larry Cerqua.
National Bank economist Daren King indicated that while November might have been the low point for home sales, it’s premature to consider the December figures as a definitive sign of a market resurgence. He highlighted potential economic challenges, such as a slowing job market and rising unemployment rates, which could impact the real estate sector.
In conclusion, while the Canadian housing market ended 2023 on a high note, it remains to be seen whether this trend will continue into 2024. The market’s future appears cautiously optimistic, with potential rate cuts and economic factors playing a significant role.
Source: https://globalnews.ca/news/10226093/crea-december-2023-home-sales-prices/
