The number of homes being sold and the prices they’re selling for are still dramatically lower than they were a year ago, but Canada’s housing market is showing signs of rebound this spring with prices and sales volumes inching higher in March compared to February.
The Canadian Real Estate Association said Friday that the average price of a Canadian home that sold last month was $686,371. That’s up from $662,437 in February, and $612,204 in January.
That’s the first time the national average selling price has increased for two months in a row since the fall of 2022, when the central bank’s aggressive campaign of rate hikes was well underway.
While prices inched up on a monthly basis, the average was still 13.7 per cent lower than it was in March of 2022.
It was a similar story on the sales side too, as the number of homes sold on CREA’s Multiple Listing Service (MLS) inched up by 1.4 per cent in March compared to February, but was still 34.4 per cent lower than it was this time last year.
Much of the national uptick was led by the country’s two most expensive housing markets, Toronto and Vancouver.
“Excluding the GTA and Greater Vancouver from the calculation cuts more than $136,000 from the national average price,” CREA said.
Supply not meeting demand
Toronto Realtor John Pankiw says the the feverish pace of last year’s market was unlike anything he’s seen in his almost 20-year career selling houses. But after going ice cold for much of 2022, things are starting to heat up again.
“I’m definitely seeing an uptick in the phone ringing,” he told CBC News in an interview at an open house for a home he’s selling in the city. “I’m definitely seeing an uptick in listings coming out. However, they are still coming out at a much slower pace than what would normally be seen in a spring market.”
Pankiw says the Bank of Canada hitting pause on rate hikes was a sign for buyers that they could feel confident that mortgage rates wouldn’t go much higher, so the demand has returned. But the availability of homes for sale is still very low.
“People don’t want to put their houses on the market necessarily when the market is low,” he said. “Inventory levels are really low, and they continue to be low. But we’re we’re seeing a definite change in that.”
It’s a similar story on the other side of the country in Vancouver, where mortgage broker Simon Bilodeau says there’s a wide gap between buyers and sellers.
“There’s a lot more clients these days,” he told CBC News in an interview this week. “What we’re missing right now is just the sellers that are still not ready to sell, I guess.”
While prices are still lower, on average, than they were a year ago, that’s not the case in every market. In cities such as Sherbrooke, Que., St. John’s, Quebec City and Saskatoon, average selling prices were higher in March 2023 than they were in the same frothy month a year earlier.
Murtaza Haider, a professor of real estate management at Toronto Metropolitan University, says that after a tumultuous year, Canada’s housing market seems to have bottomed out.
“We may be hitting the bottom of this downward slope or downward curve,” he told CBC News in an interview. “We’re not expecting the prices to increase beyond what we saw at the peak of February or March of 2022,” he said. “[But] prices will stop falling month over month and will start climbing pretty soon.”
Robert Kavcic, an economist with BMO, said he agrees that the lack of new listings is the main factor driving the market right now.
“The Bank of Canada’s pause messaging stoked an immediate improvement in market psychology (i.e., the worst is over), and a dip in fixed mortgage rates has also helped,” he said.
Kavcic said when the slowdown began last year, he was forecasting a decline of about 20 per cent for average prices. That’s just about what happened, with the average selling price topping out at $816,720 in February of 2022 and seemingly bottoming at $612,204 11 months later — a drop of 25 per cent.
What happens next, Kavcic says, will depend on a few factors beyond supply and demand. “The next leg of this real estate cycle will be dictated by how well the real economy holds up in the second half of the year — and, as always, the path of interest rates.”
“In the meantime, home prices across many markets could be trending stable to modestly higher.”