Canadian Housing Monitor

August 15, 2024 | 09:50

Canadian Housing Monitor: August 2024

Economist

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Robert Kavcic

Senior Economist and Director
Economics

Robert has been with BMO Capital Markets since 2006. He plays a key role... (Read more)

Cool Summer

Stability describes the Canadian housing market as we push through the heat of summer. Sales volumes are holding steady at reasonable levels, listing flow is solid but not saturating the market (with an exception or two), and prices are steady across most markets. Considering the massive swings in prices, activity and interest rates in recent years, this in an outcome that the industry should be thrilled with.

Canadian existing home sales dipped 0.7% in seasonally-adjusted terms in July, and were up a decent 4.8% from a year ago. This continues a subdued but largely stable level of sales activity consistent with the low end of the pre-COVID range.

Meantime, new listings rose modestly again and were up a firm 12.7% from a year ago. That leaves new listings just slightly above the 10-year average, which is allowing inventory to gradually build, but not saturate the market. Indeed, the months’ supply of homes for sale (adjusted for the sales pace), held steady at 4.2, which is well up from the early-2022 low of 1.7, but only back into the low end of the pre-COVID range. The sales-to-new listings ratio dipped slightly to 52.7 in July, which leaves the market firmly in balanced territory.

Table 1 - Canada — Existing Home Sales

(% change)

Source: BMO Economics, Haver Analytics, CREA

Balanced overall market conditions leave price trends subdued, with the MLS benchmark price still down 4.2% in the past year, but holding firm in recent months. Prices are effectively flat over the latest 3- and 6-month periods.

The national figures mask variation at the regional level. While Alberta is still tight, the market balance has softened notably in recent months. Sellers’ markets persist across the Prairies and Atlantic Canada, where relative affordability and inward migration flows continue to support demand. Vancouver and Montreal look mostly balanced, and are posting better-than-average price performance over the past year. Ontario remains the soft spot, with buyers’ markets still scattered across various areas of the province. Toronto is a somewhat unique case, where scarce single-detached housing continues to counter plenty of resale condo inventory—the most since the 2009 recession. In the past six months, single-detached prices in Toronto have risen by 3.2% annualized, while condo prices have fallen at a 2% clip.

All told, the resale housing market has yet to respond meaningfully to Bank of Canada rate cuts, which was entirely expected given the existing spread between fixed and variable mortgage rates—few Canadians were using variable, so the early phase of rate cuts wasn’t going to provide much relief. Now, with the bond market building in more aggressive near-term easing in both the U.S. and Canada, fixed mortgage rates could continue to drift down. If we head into next spring with borrowing costs down around 4%, things could get more interesting. For now, the market remains very stable.

National Price Trends

Market Balance

Local Market Conditions

Recent Reports of Interest

Pathways to Affordability for Canada’s Housing Market: You would need to go back to the era of double-digit mortgage rates in the early 1990s to see the last time buying a home in Canada was as expensive as it is today. Is there a route back to affordability and, if so, how long will it take?

Canadian Housing Liftoff or Letdown? The Bank of Canada’s rate cut marks a key moment in this cycle. Most market participants have been eagerly awaiting this cut, but a 25 bp trim to variable rates from 23-year highs is very little actual relief when most borrowers have already moved to lower fixed-rate mortgages.

Extraordinary Population Delusions and the Trouble with Crowds: The narratives around the population boom have, in our view, been off the mark. Here are five things worth challenging.

Housing Outlook 2024: Laying the Floor: The Canadian housing market should enter a period of overall stability this year, with lower resale prices and easing mortgage rates, but, a return to the rollicking price gains of recent years is unlikely.

Real Estate Investment: The Good, the Bad and the Implications: Does real estate investment make sense at this stage of the cycle? And if not, what are some implications?