Atypical December Home Sales - Early Signs of a Hot Spring Market?
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As 2023 came to an end, home sales in Canada saw an unexpected surge in December, surprising many in the industry who were anticipating slower sales to close out the year. According to CREA’s report, home sales month-over-month rose at levels comparable to last year’s stronger spring and summer real estate months.
All signs point to a possible recovering market based on the national overview of the Canadian real estate market in December 2023 and advanced projections on what to expect over the next year. Overall, sales and home prices are predicted to climb in 2024 and 2025.
- December 2023 saw a surprising 8.7% monthly increase in sales compared to November.
- The national average home price rose 5.1% to $657,145.
- Home prices and sales are projected to increase in 2024 and 2025 due to anticipated rate cuts and built-up housing demand.
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December 2023 Real Estate Market Overview
The Canadian real estate market experienced an unexpected monthly surge in December, with an 8.7% increase in sales compared to November. This upturn was also reflected in annual figures, with a 3.7% increase in sales activity compared to December last year.
National average home prices also increased in December, rising 5.1% year-over-year, reaching an average price of $657,145 despite a drop in new listings. The number of newly listed homes dropped 5.1% month-to-month in December, reaching the lowest level since June.
This month’s market surge is attributed to buyers and sellers waiting for price corrections, shifting their expectations and completing deals before the end of the year. This unexpected recovery in the market may be an anomaly, and it remains to be seen if this trend will continue into the spring lending season.
Regional Market Trends
Ontario continued to experience price declines, with overall prices falling by 0.5% across the province compared to December last year. These declines are being fueled by drops in home prices within the Greater Golden Horseshoe region, where home prices are some of the highest in the province.
This area witnessed a dramatic surge in home prices during the pandemic when interest rates hit all-time lows. Prices in these regions have been correcting since the Bank of Canada began to hike rates in March 2022, contributing significantly to the province’s overall price decline.
British Columbia has also seen price corrections this year; however, home prices are up 4% from December last year. Regions such as Alberta (+8.7% year-over-year) and New Brunswick (+8.3% year-over-year) saw the opposite trend, with home prices rising most of the year. As market conditions evolve, price trends are becoming more varied across Canada, with regional differences becoming less distinct.
2023 Market Performance Recap
In terms of annual performance, 2023 saw a total of 443,511 sales, marking a decline of 11.1% from 2022. Despite this being the lowest annual level for sales activity since 2008, it was close to sales levels experienced in the 5 years following the financial crisis and again in 2018 when the mortgage stress test was first implemented.
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Core Factors Influencing Market Trends This Year
One of the core factors affecting the housing market over the past few years has been the Bank of Canada’s interest rate hikes. The housing market has remained slow ever since, and with interest rates predicted to be held until at least mid-2024, that trend is likely to continue. Buyers will want to wait for rate cuts to make homeownership a bit more affordable before entering the market, while sellers will likely wait for home prices to rebound before putting their homes on the market.
Recent expectations around the timing of rate cuts and pent-up housing demand have increased the forecast for housing sales activity in 2024. CREA’s quarterly forecast predicts sales will increase by 10.4%, with a projected 489,661 properties sold in 2024. These expectations are driven by provinces like Alberta, where the demand for housing remains strong, and a rebound is expected in Ontario, British Columbia, and Nova Scotia.
Home prices are predicted to climb 2.3% to $694,173 nationally in 2024. Price gains in Alberta, Quebec, Nova Scotia, New Brunswick, and Newfoundland and Labrador are all expected to outpace the national average this year. Meanwhile, it’s expected that Ontario and British Columbia are likely to see relatively flat prices throughout the year.
In 2025, home sales are predicted to climb 7.3% to 525,498 as interest rates decline, returning to a more neutral level. Home prices are predicted to rise 4% to $722,063 in 2025 as demand returns to the market while supply constraints remain an issue.
Looking ahead, the anticipated market trends for 2024 show signs of growing optimism due to expected rate cuts and built-up buyer demand. This trend will likely continue into 2025 as interest rates return to a more neutral level. However, the market is still on the path to recovery from the sharp declines experienced in 2023.
To learn more about the Canadian housing market and to find out what’s in store for mortgage rates, check out the posts below for timely updates on market predictions and trends:
- Mortgage Rates Forecast Canada 2024
- Canadian Housing Market Outlook 2024
- Ontario Housing Market Outlook 2024
- Toronto Housing Market Outlook 2024
- Ottawa Housing Market Outlook 2024
- Quebec Housing Market Outlook 2024
- Montreal Housing Market Outlook 2024
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