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Canadian home prices recovered over $100,000 from January to April

The Canadian housing market continued to rebound in April as stabilizing borrowing costs helped spur buyers off the sidelines, contributing to strong short-term growth in both sales and prices.

The most recent data from the Canadian Real Estate Association (CREA) reveals a total of 44,059 homes sold, up 11.3% from March. That marks the third consecutive month of improved activity, and a considerable uptick from the 1.4% increase between February and March. While that number still lags last year’s by nearly 20%, the year-over-year gap continues to shrink, now less than half of the gargantuan -40% difference recorded just two months ago.

This is due to a more apples-to-apples comparison of the market, following the start of the Bank of Canada’s rate hiking cycle in March 2022; prior to this March, the numbers compared post rate-hike activity to the market’s peak. The resulting chasm indicated just how impacted borrowers were by higher mortgage rates, along with reduced homebuying demand.

But it appears all signs of rate-induced correction are now in the rearview mirror; price growth has been persistent, with the national average hitting $716,000 in April. That’s up 5.7% from March and a whopping $103,500 from January, which CREA attributes to market recovery in major cities such as the Greater Toronto and Vancouver areas.

Prices remain -3.9% below 2022 levels, but as with sales, that gap is narrowing significantly. However, homes are still selling for an average of $100,000 less than they were at the market’s peak in February 2022, when the average price hit $816,720.

The MLS® Home Price Index (HPI) – a measure that strips out the highest and lowest extremities from the market to reflect the most typical home sold – rose 1.6% on a monthly basis, which CREA notes is “a large increase for a single month,” though remains down -12.3% year over year. 

A steadily creeping sellers’ market

A stubborn lack of supply continues to squeeze buyers, as the market moved deeper into sellers’ territory. With sales gains vastly outpacing new listings in April, the sales-to-new listings ratio jumped to 70.2%, up from 64.1% in March; the long-term average for this measure is 55.1%. CREA defines a ratio of between 40 - 60% to indicate a balanced housing market, with above and below that threshold reflecting sellers’ and buyers’ markets, respectively.

A total of 67,472 homes were brought to market, marking a -26.3% decline from 2022, and up just 1.6% month over month. In all, the amount of new supply sits at a 20-year low, says CREA.

“Over the last few months, there have been signs that housing markets were going to heat back up this year, so it wasn’t a surprise to see things take off after the Easter weekend, which often serves as the opener to the spring market,” said Larry Cerqua, CREA’s 2023-2024 Chair. “The issue going forward is not new: demand is once again returning at a scale that is outpacing supply.” 

There were 3.3 months of inventory on a national basis at the end of April 2023, down half a month from 3.8 months at the end of March. The long-term average for this measure is about five months.

Lower mortgage costs encouraging buyers

Shaun Cathcart, CREA’s Senior Economist, points to improved borrowing costs as one of the key motivators for buyers; fixed mortgage rates have been slightly discounted in recent weeks in response to bond market fluctuations, with today’s lowest five-year fixed rate at 4.29%. Meanwhile, variable mortgage rates have stabilized due to the Bank of Canada’s rate hold stance, with the nation’s best five-year variable mortgage term at 5.55%.

A recent study from finds this has resulted in a considerable rebound in demand for fixed-rate options, which have accounted for 79% of all rate inquiries thus far in 2023, compared to 66% in 2022.

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“With interest rates at a top, and home prices at a bottom, it wasn’t all that surprising to see buyers jumping off the sidelines and back into the market in April,” Cathcart stated.

“Supply, on the other hand, has been sluggish, hence the price gains from March to April seen all over the country. Looking ahead, the first week of May did see a bit of a burst of new supply, suggesting some of those April buyers were existing owners now looking to sell their current homes. That could make for the kind of virtuous circle that might ultimately get more first-time buyers into the ownership space this year.” 

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