National home sales jump unexpectedly in December
December 2023 CREA update
Penelope Graham, Head of Content
After a flat November – and expectations of a chilly year-end market – the national December real estate numbers have surprised on the upside, posting an 8.7% monthly increase in sales compared to November, with 38,135 properties changing hands. On an annual basis, sales activity was up 3.7%.
A -5.1% drop in new listings also helped tighten up market conditions, and put slight upward pressure on home prices; the national average rose 5.1% year over year to $657,145, reveals the Canadian Real Estate Association (CREA).
With sales up and new listings down in December, the national sales-to-new listings ratio tightened to 57.8% the previous month. The long-term average for the national SNRL is 55%. This reflects largely balanced conditions, according to CREA – ratios below 40% indicate buyers’ markets, while above 60% point to seller-friendly conditions. Overall inventory also remains low at 3.8 months – down from 4.2 in November, and well below the long-term trend of five months.
Stronger sales due to last-minute deals
Firmer market conditions may hint at renewed buyer enthusiasm – but CREA’s analysts warn celebrations of a market recovery are preliminary. December’s uptick was largely due to lagging buyers finally firming up deals, they say.
“Was the December bounce in home sales the start of the expected recovery in Canadian housing markets? Probably not just yet,” said Shaun Cathcart, CREA’s Senior Economist. “It was more likely just some of the sellers and buyers that were holding onto unrealistic pricing expectations last fall finally coming together to get deals done before the end of the year. We’re still forecasting a recovery in housing demand in 2024, but we’ll have to wait a few more months to get a sense of what that ultimately looks like.”
The market’s real test will come once the weather warms, adds CREA Chair Larry Cerqua, as the typically busy season gets underway.
“While December did offer up a bit of a surprise in sales numbers to cap the year, the real test of the markets’ resilience will be in the spring,” he stated.
Ontario markets continued to see the largest price declines in December, especially within the Greater Golden Horseshoe region; home prices there soared dramatically over the course of the pandemic, and have been absorbing significant corrections since the Bank of Canada’s hiking cycle kicked off in March 2022. Price growth has also slowed in British Columbia, while rising in other provinces such as Alberta, New Brunswick, and Newfoundland and Labrador.
“That said, as market conditions have recently been evolving, price trends are becoming more of a mixed bag where the regional differences are less clearly defined,” states CREA’s report.
Overall, 2023 as a whole closed out with a total of 443,511 sales, an -11.1% decline from 2022. That was “technically the lowest annual level for national sales activity since 2008,” though CREA points out the drop mirrors other challenging market years, such as the period following the financial crisis, as well as in 2018, when the uninsured mortgage stress test was first implemented.
Market to see modest bounce-back in 2024
CREA also released an updated forecast for housing market activity for 2024 and 2025, pointing to growing optimism over rate cuts, and built-up buyer demand – but that may not be enough to considerably move the dial, given the market is still recovering from sharp declines in 2023.
“Canadian housing markets have remained quiet since the Bank of Canada’s interest rate hikes last summer. Interest rates have been the major factor affecting markets over the last few years, and this is expected to continue in 2024 and 2025,” states the association.
“Expectations around the timing of the first 2024 rate cut have recently been pulled forward. The expected number of total cuts to interest rates (in terms of basis points) in 2024 have also increased in the last few months . Combined with ever-increasing pent-up demand for housing in Canada, the forecast for housing sales activity this year has been raised. That being said, given its starting point is lower than previously expected, the 2024 annual forecast remains relatively unchanged.”
Also read: Ratehub.ca’s 2024 mortgage predictions
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CREA anticipates a total of 489,661 homes will be sold in 2024, marking a 10.4% increase from last year. Sales recovery is expected to be concentrated in provinces where housing demand has remained strong, such as Alberta. However, markets that have seen “historically low sales volume”, such as Ontario, BC, and Nova Scotia, are due for a comeback.
The national average home price will rise by 2.3% to $694,173 in 2024, with the largest upticks in Alberta, Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador. British Columbia and Ontario home prices, however, are forecast to stay largely unchanged.
Activity will continue to pick up steam in 2025, with sales to hit 525,498 units – an increase of 7.3%, and the national average home price to rise by 4% to $722,063.