Canada’s housing market began 2023 in a state of rebalance: home sales were down, inventory remained limited, sales prices were softening, and interest rates were on the rise. In March, with inflation showing signs of improvement, the Bank of Canada announced a conditional pause on its series of interest rate hikes, sending a wave of eager buyers to the market. Demand for homes was robust, and within months sales activity had returned to prepandemic levels, leading to an uptick in new listings and a boost in home sales.
By summer, housing supply had fallen to a two-decade low and competition for available homes was fierce, with the national average sales price up more than $100,000 since the beginning of the year, according to the Canadian Real Estate Association. The Bank of Canada resumed its series of rate hikes, raising the benchmark rate to 5%, a 22-year high, pushing many buyers and sellers back to the sidelines.
Affordability challenges led home sales to fall once again, breaking a six-month streak of monthly sales increases, while supply and demand imbalances continued to put upward pressure on sales prices in many areas.
Sales: By year’s end, sales were down 11.2 percent to 2,402 units.
Prices: Home prices were down 7.0 percent to $795,000 for the year. Single Family home prices ended the year down 8.8 percent compared to last year, and Townhouse/Condo home prices were down 4.3 percent.
Listings: Year-over-year, the number of homes available for sale was up 39.3 percent. There were 372 active listings at the end of 2023 compared to 267 listings at the end of 2022. New listings were down 9.1 percent to finish the year at 4,269.
Sales by Price Range: The number of homes sold in the $349,999 and Below price range fell 40 percent to 9 units. Homes sold in the $350,000 to $484,999 price range rose 35.4 percent to 130 units.
List Price Received: Sellers received, on average, 99.7 of their list price at sale, a year-over-year decline of 5.9 percent. If demand shrinks in 2024, list price received at sale could drop as well.
The Bank of Canada has signaled that it may be nearing the end of its rate hiking cycle, with some economists predicting 2024 may bring rate cuts, although it may not be until midyear or later. In the meantime, inventory will remain tight compared to recent years, and affordability challenges will continue to impact home sales, which will help ensure the Canadian rental market remains competitive in the months ahead. As for home prices, opinions are mixed, with some analysts expecting prices will hold steady or continue rising in areas, while others foresee a modest price drop in some markets, at least until interest rates begin to decline.
