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Buyers and sellers to “hunker down” until spring: CREA

December CREA update

Canada’s housing market is “hunkering down” into hibernation mode, as the November data reveals a prolonged cooling in sales and price growth.

As reported by the Canadian Real Estate Association, a total of 29,869 homes sold over the course of the month, marking a -0.9% decline on both an annual and monthly basis.

New listings, meanwhile, also slowed over the short term, with 54,140 homes brought to market; down -1.8% from October, but still up 10.5% from last year’s historically low point.

The national average home price came in at $646,134 in November, up 2% from the same period last year. That’s down by more than -20% from the all-time high of $816,720 recorded last February – a dollar difference of $170,586. The MLS® Home Price Index (HPI) decreased 1.1% month over month but was still up 0.6% year over year.

Canadian real estate conditions now balanced

As new listings dipped by a greater extent than sales, market conditions actually tightened slightly, with the sales-to-new-listings ratio (SNLR) rising to 49.8% from 49.5% in October. This is the first time the measure – which gauges the level of buyer competition in the market – has increased since April, says CREA. According to the association, a ratio between 40 - 60% reflects balanced market conditions, while above and below that threshold indicate sellers’ and buyers’ markets, respectively. The long-term average for the national sales-to-new listings ratio is 55.1%.

From a national perspective, November’s housing market can be considered firmly in balanced territory, which spells some relief for those who are still actively looking to purchase a home.

"I wouldn’t expect anything too headline- grabbing from the resale housing market for the next few months," said Larry Cerqua, Chair of CREA. "That’s a good thing, because a market that looks to be stabilizing in balanced territory increasingly suggests the soft-landing scenario.”

The number of months of inventory – the amount of time it would take to fully sell off all available homes for sale amid current market conditions – sits at 4.2 months, up just slightly from October’s 4.1. “As such, this measure also looks to be stabilizing, and is still almost a full month below its long-term average of near five months of inventory,” states CREA’s report.

Real estate market poised for spring awakening

Overall, chilly November conditions follow a busier-than-expected – though likely disappointing – fall for sellers, says CREA Senior Economist Shaun Cathcart, adding the market will remain quiet until at least the spring, as the promise of rate cuts should entice buyers and sellers back into action.

"While it was clear from about August that a lot of buyers were probably going to head back to the sidelines until at least next spring, a surprising number of sellers nonetheless chose to try their luck this fall," he said. "Not getting offers they were willing to accept, it’s looking like many of them are also now resigned to hunker down until next year. It’s probably a good move given that recent expectations around interest rate cuts suggest it might be a somewhat more active spring market than we thought."

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Analysts are increasingly expecting the Bank of Canada to lower its trend-setting interest rate as early as next April, following a third consecutive rate hold from the central bank on December 6. This was echoed by a similar hold and dovish language this week from the US Federal Reserve, further firming up the possibility that a lower rate environment is on the horizon.

In fact, according to a 2024 mortgage market prediction from James Laird’s Co-CEO and President of CanWise mortgage lender the BoC has taken its foot completely off the rate-hiking gas pedal, with 50 - 100 basis points in cuts poised for the second half of the year.

“The Bank will hold the target for the overnight rate at 5% for the first half of 2024 and will start making cuts in the second half of the year,” he says.

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Penelope Graham, Director of Content

Penelope has over a decade of experience covering real estate, mortgage, and personal finance topics and her commentary on the housing market is featured on both national and local media outlets.