The Canadian Real Estate Association is reporting a notable sales bump for the final month of 2023, but it does not see the increase as the start of a trend. At least, not yet.
Strong Month but Weak Year
Sales for December jumped 8.7% compared to November and were up 3.7% compared to December of 2022. But 2023 was, technically, the weakest year for sales since the financial crisis in 2008. Home sales totalled 443,500 units, down 11.1% from 2022.
Interest Rate Waiting Game
CREA does not expect to see any significant shift in the market until interest rates start to come down.
“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,” CREA says in its latest Quarterly Forecast.
Looking to a Brighter Future
The forecast is optimistic that the Bank of Canada will start cutting rates sooner than previously expected. It is also hopeful the total number of cuts, in terms of basis points, will be greater than earlier forecasts.
Looking ahead to 2024 and 2025 CREA expects to see about 490,000 residential properties change hands this year, a 10.4% increase over 2023. The national average price is forecast to climb by a moderate 2.3% to a little more than $694,000.
The outlook for 2025 is brighter with the expectation that interest rates will continue to fall to more normal, or neutral levels. Sales are expected to climb by 7.3% over the 2024 figures, to 525,500 units. The average price is predicted to rise to $722,000, up 4.0% from ’24.
Market to Remain Tight
CREA also sees ongoing supply shortages. The Association’s December report shows the number of new listings dropped 5.1% from November. The sales-to-new listings ratio tightened to 57.8% from 50.5%.