The Canadian real estate market is going through an adjustment period right now. After a couple of years of meteoric growth across the entire housing sector, conditions seem to be settling, the frenzy has come to an end, and Canadian housing markets from coast to coast are regaining equilibrium.

According to the 2024 RE/MAX Canadian Housing Market Outlook, the national average residential price is expected to rise only slightly this year, by 0.5 percent. Meanwhile, 61 percent of markets surveyed in the report are expected to see unit sales increase year over year. This is a complete retreat from the challenging market conditions experienced in early 2022.

So, what is happening exactly? First, the Bank of Canada (BoC) has been raising interest rates, a tightening cycle that has lifted mortgage rates. Second, there has been a great deal of uncertainty in the housing market and the broader economy. Third, many households have exhausted their pandemic-era savings, and inflation has diminished their purchasing power.

Ultimately, the Canadian real estate market is slipping into balanced territory because of the latest developments nationwide. RE/MAX’s outlook for the Canadian housing market suggests 41 percent of regions will return to balance, while 28 percent of markets will likely favour sellers, 21 percent tilted toward buyers, and four percent will experience mixed conditions.

“It’s been a challenging year for Canadian homebuyers and sellers, who have been feeling the effects of a severe housing shortage and the high cost of living, but much like Canada’s housing market, Canadians have stayed resilient. Historically, real estate has given owners excellent returns and strong financial security – and that hasn’t changed,” said Christopher Alexander, President of RE/MAX Canada. “The slower market we experienced across the country in the fall could be an early indicator of an active 2024, as reflected in the modest price increase and sales outlook in 2024, and the balancing of conditions in several regions across the country.”

But while this talk of balancing conditions and steadying prices is good news for prospective homebuyers, what about sellers? Is this type of environment beneficial for those looking to list their home this year?

Why Current Conditions in the Canadian Real Estate Market Could Be Good News for Sellers

So, what exactly is a balanced or buyer’s market anyway?

A balanced market is when the supply of residential properties meets the level of demand. A buyer’s market is when there is a greater inventory of homes than the number of buyers.

Now, it is crucial to understand how these types of climates work:

Buyers will possess more leverage and may be able to negotiate prices. (Much different from years past!)

Your home may sit unsold on the market for longer than you anticipated.

You might need to lower your expectations from your initial asking price.

With prices expected to ease in 2024 and conditions tilting in favour of buyers, where is the good news for sellers?

First, the +0.5-per-cent outlook is a national average, and may be higher or lower depending on where you are located. For example, if you are selling your home in the Edmonton real estate market, the sale price is expected to rise four percent in 2024. Meanwhile, if you are listing your home for sale in the Windsor housing market, average price is expected to rise seven percent this year.

Second, if you are selling your home, you will also need another place to hang your hat once the transaction is completed. Therefore, if you take the equity and purchase another residence, you will not have to endure the frenzy and panic of a seller’s market.

Finally, a balanced market does not mean you will need to give away your home for a 20 percent discount. But you might need to employ a few additional measures to attract buyers. Here are several suggestions:

• Always work with a real estate agent.

• Be sure that your home is in tip-top shape and have your home inspected before a For Sale sign is erected on your front lawn.

• Make your front and backyard presentable; enhance your home’s curb appeal.

• Ensure that you clean your house of clutter.

• Add a couple of incentives, such as new appliances.

Remember, there is still demand for housing. With the Bank of Canada expected to start decreasing interest rates this year, home buying is likely to pick up again, especially as immigration levels rise. Put simply, the competition in the Canadian real estate market will likely be revived.

“Canadians have been understandably hesitant to engage in the market in 2023. Despite this, Canadians still see real estate as a solid long-term investment,” said Alexander.

Courtesy RE/MAX Canada

DECEMBER 2023 HOUSING MARKET UPDATE

January 2, 2024

Strong migration and low supply drive Calgary housing prices in 2023

Sales in 2023 did ease relative to last year's peak, but with 27,416 sales, levels were still far higher than long-term trends and activity reported before the pandemic. While sales stayed relatively strong, there was a notable shift in activity toward more affordable apartment condominiums style homes.

“Higher lending rates dampened housing demand this year, but thanks to strong migration levels, housing demand remained relatively strong, especially for affordable options in our market,” said CREB® Chief Economist Ann-Marie Lurie. “At the same time, supply levels were low compared to the demand throughout the year, resulting in stronger than expected price growth.”

Inventory levels were persistently below long-term trends for the city throughout most of the year, averaging a 44 per cent decline over the 10-year average. We also saw the months of supply remain well below two months throughout most of the year across homes priced below $1,000,000.

The persistently tight conditions contributed to our city's new record high price. While the average annual benchmark price growth did slow from 12 per cent in 2022 to nearly six per cent growth in 2023, the price growth was still relatively strong especially compared to some markets in the country.

Detached

With an annual decline of nearly 20 per cent, the detached market saw the most significant decline in sales activity. While sales did improve for homes priced above $700,000, limited supply choices in the lower price ranges caused consumers to turn to alternative housing styles. Despite some recent gains in higher-priced new listings, inventories have remained near record lows, and the months of supply have remained relatively low throughout 2023.

The persistently tight market conditions have supported further price growth for detached homes, albeit at a slower pace than last year. On average, the benchmark price rose by nearly eight per cent in 2023, with the most significant gains occurring in the city's most affordable districts.

Semi-Detached

Like the detached sector, year-over-year sales growth since May was not enough to offset the pullbacks at the beginning of the year, leaving 2023 sales down by 10 per cent. The decline in sales was driven by pullbacks for homes priced under $500,000, while sales improved for higher-priced properties. The decline in the lower range was primarily due to limited supply choices, preventing stronger sales.

Persistently tight market conditions this year caused prices to trend up throughout most of the year. On an annual basis, the benchmark price rose by seven per cent over last year—a slower gain than the 12 per cent reported in 2022, but still relatively strong. Price growth ranged from a low of six per cent in the city centre to over 16 per cent in the east district.

Row

Limited supply choices in the lower price ranges contributed to the pullback in sales in 2023. Annual sales declined by over 11 per cent despite rising sales for homes priced above $400,000. While new listings did show signs of improving in the second half of the year, all of the gains were reported in the higher price ranges, causing relatively more balanced conditions in the upper price ranges versus the sellers’ market conditions in the lower price ranges.

Conditions favoured the seller throughout the year, supporting an annual benchmark price gain of over 13 per cent. Prices improved across each district, ranging from a low of 11 per cent in the city centre to over 20 per cent price growth in both the North East and East districts.

Apartment Condominium

Apartment-style properties were the only property type to report a gain in sales this year, resulting in a record high of 7,884. The growth in sales was possible thanks to the higher starting point for inventory levels and gains in new listings. However, conditions tightened throughout the year, favouring the seller and driving price growth.

Apartment condominium prices finally recovered from their 2014 high earlier this year and have pushed above those levels, reaching a new record high of $321,400 by December. On an annual basis, the 2023 benchmark price rose by over 13 per cent, a faster pace than the annual growth levels reported last year.  

REGIONAL MARKET FACTS

Airdrie

Primarily due to pullbacks for detached homes, sales in Airdrie declined by 24 per cent over last year's record high. Low inventory levels and a pullback in new listings have somewhat limited sales. While new listings have risen over last year's levels for the past four months, they are still 24 per cent lower than last year. The decline in sales and new listings ensured inventories remained low this year, declining over last year’s and falling to the lowest annual average levels seen since 2006.

For the third year in a row, conditions in Airdrie have generally favoured the seller. This has driven further price gains this year, albeit at a slower pace. On an annual basis, the benchmark price rose by nearly five per cent. This year, the price growth for row and apartment-style properties has been more than double that reported in the detached and semi-detached sectors.

Cochrane

Both sales and new listings in Cochrane fell over last year’s levels. However, recent gains in new listings relative to sales did help support some inventory gains. While inventory levels have improved over the low levels reported last year, they remain over 40 per cent below what we traditionally see in the market.

The recent shifts in new listings relative to sales have helped the months of supply stay above two months since September. However, conditions are still relatively tight, and prices continue to rise. While the growth was stronger in the higher-density sectors of the market, the detached benchmark prices increased by four per cent in 2023 over last year.

Okotoks

Supply has been a challenge in Okotoks, impacting sales and prices. While we have seen some improvements lately regarding the level of new listings compared to sales, inventories have remained near record lows and averaged 63 per cent below long-term trends on an annual basis.

Conditions have remained relatively tight throughout most of the year, especially throughout the busier spring season. Despite some monthly variation, prices generally trended up this year and, on an annual basis, rose by over six per cent.

Click here to view the full City of Calgary monthly stats package.

Click here to view the full Calgary region monthly stats package.

Lawmakers across Canada have put a renewed focus on making housing more affordable, but experts predict chronic issues around pricing and supply will keep straining the country’s rental market in 2024.

“I don't see things getting better in the short term,” Steve Pomeroy, senior research fellow for the Centre for Urban Research and Education at Carleton University, told BNNBloomberg.ca in an interview.

Pomeroy expects a recent uptick in rental construction will partially alleviate the supply shortage in Canada, but he said it will take some time for renters to see meaningful relief.

“We've actually significantly increased our game in terms of adding new rental supply,” Pomeroy said, noting that the pace of rental construction has picked up in Canada in recent years.

“But it's a lag issue,” he continued. “It's going to take a bunch of years … to catch up, and if we don't suppress demand in the short term, we're going to continue to have short-term pressures.”

‘A SLOWER YEAR FOR RENT INCREASES’

Shaun Hildebrand, president of real estate consulting firm Urbanation, told BNNBloomberg.ca that rent prices in Canada will likely remain elevated next year, but he expects price growth to be slower.

“It'll be a slower year for rent increases, particularly in the more expensive markets,” he said in an interview.

Urbanation’s latest monthly rent report found that the average asking price for a rental unit in Canada was $2,174 in November, relatively flat from the previous month but an 8.4 per cent increase year-over-year.

It also found the annual rate of rent growth in Canada has been slowing, following year-over-year increases of 9.9 per cent in October and 11.1 per cent in September.

Hildebrand noted that average rent prices in Toronto and Vancouver decreased towards the end of 2023, due in part to seasonal demand changes, as rent prices tend to decline in the late fall and winter.

Renters may still take advantage of the cooling trend in the early months of 2024, he said.

“If you are a renter that's looking for a unit in Toronto or perhaps Vancouver, the next few months would be quite favorable to do so, but the structural supply deficit in these markets is still very acute,” he said.

A decline in inflation in 2024 and potential interest rate cuts could take some pressure off rent prices in 2024 as first-time homebuyers move into the ownership market, Hildebrand said. However, he cautioned that home prices will likely remain prohibitive for many Canadians. 

Despite the ongoing challenges faced by Canadian renters, Hildebrand said he expects the record price growth seen in the rental market to “move into the mid-to-lower single digits” at the outset of 2024.

GST REMOVAL

The federal government announced in September that it would waive GST on new rental projects in an effort to encourage new developments.

Ontario, the province with the most renters in the country, followed suit in November, announcing the removal of their portion of the HST on new rental builds.

Developers have welcomed the changes but highlighted more work that must be done to add supply to the market.

Giacomo Ladas with rentals site rentals.ca said the tax measures have made rental construction more economically viable for developers, though many challenges remain.

“It’s a really good first step, but there are still so many hurdles that I've talked to developers about that slow down the construction of these new apartments,” Ladas told BNNBloomberg.ca in a phone interview.

“It could take six or eight months, I was told by some developers, to negotiate what colour to paint the facade of their building … there's so many hurdles for them to actually get something built.”

POPULATION GROWTH

Pomeroy and other experts have made the case that record immigration numbers have contributed to the post-pandemic rental supply shortage that has driven up rent prices in turn.

Canada has seen significant increases in its non-permanent resident population, many of them temporary foreign workers and international students.

“Those are the folks who rent,” Pomeroy said.

“The immigration policy or the lack of management of immigration, particularly temporary immigration, I think was the key driver in excess demand. It's not so much that we had a chronic problem of under supply, we had an instant issue of surging excess demand.”

The federal government has tabled plans to level out the number of new permanent residents to Canada in 2026, and doubled the income requirement for foreign students who wish to study in Canada.

But Pomeroy said that in 2024, he doesn’t see those measures “massively ratcheting back” the number of international students or foreign workers coming to Canada.

“In the absence of very aggressive action on reducing that number, then that pressure is not going to go away,” he said.

Courtesy BNN Bloomberg with files from the Canadian Press.

Should Canada’s banking regulators abandon the mortgage stress test?

In 2016, the Canadian government introduced the mortgage stress test as a vital tool to curb risks associated with mortgage lending, especially when the Canadian real estate market experiences higher prices and lower interest rates. It was also amended in 2021 to require borrowers to prove they can maintain mortgage repayments that are 200 basis points above the contracted rate.

The mortgage stress test maintains two thresholds: a minimum qualifying rate (MQR) and an interest rate that is two percentage points higher than the borrower’s mortgage rate. As a result, today’s homebuyers could be experiencing rates between seven and nine percent.

A chorus of housing and finance arguments argue that it is time to ditch or relax this measure as interest rates have risen to their highest levels since before the global financial crisis. Indeed, when the policy was introduced nearly a decade ago, mortgage rates were nearly half of today’s rates. Since July, the conventional five-year fixed-rate mortgage lending rate has been around six percent.

Therefore, critics contend the Bank of Canada’s (BoC) tightening efforts have achieved some safeguards regulators have aimed to install throughout the nation’s housing sector, making the tool obsolete.

“I am all for building a buffer for people’s financial situation, but the stress test limits the amount people can borrow,” Matt Albinati, a mortgage broker with TMG The Mortgage Group, told Canadian Mortgage Trends. “You look back a year, the stress test was doing a pretty good job. This time—or near in the future—it might be a good time to take a closer look at it.”

But officials have been firm on the matter: no relief on the stress test is coming to the mortgage market.

No Relief on Stress Test Coming

The Office of the Superintendent of Financial Institutions (OSFI) says it will not be changing the mortgage stress or exempting some parties from the protective measure.

In response to the Canadian real estate industry’s wider fears about the possibility of new lending rules, the country’s chief bank regulator effectively shot down any expectation that the stress test is going away. In fact, industry experts make the case that the OSFI ostensibly doubled down on the method.

“When a borrower opts to switch lenders, a new loan is created. We therefore expect that the loan be fully underwritten, including application of the MQR for uninsured mortgages to assess debt affordability,” the OSFI said in an Oct. 16 report. “This is because the new lender must do its own due diligence as it will own the credit risk for an uninsured loan.”

In addition, the OSFI surprised mortgage brokers and lenders with this statement:

“Insured borrowers, however, are exempt from the re-application of the MQR when switching lenders at renewal. This is because the borrower’s credit risk has been transferred for the life of the loan to the mortgage insurer.”

For the most part, the mortgage sector had believed insured borrowers faced stress tests upon renewal if they transitioned to a new lender.

Meanwhile, Canada’s top banking regulator noted that exempting all mortgage renewals from the stress test “could cause lenders to compete for loans that do not meet” its expectations. At the same time, the OSFI conceded that it would assess data of uncompetitive rates for borrowers who cannot switch lenders and would “take action if warranted.”

And instead of dismantling the mortgage stress test, the OSFI is considering adding layers to the protective measure.

Regulators could mandate lenders to add more components to the stress test or insert a qualifying amortization period. This could be achieved by connecting the stress test to debt service metrics to determine the borrowers’ abilities to pay their loans and other expenses.

“We believe there is merit in lenders applying an explicit, qualifying amortization limit, and we will continue to evaluate this proposal,” the OSFI said.

Stress Test ‘Not Perfect’

At the September Scotiabank Financials Summit, OSFI Superintendent Peter Routledge conceded that the mortgage stress test “was not perfect.”

“Perhaps it is better to call it incomplete,” he said at the event. “We seek an integrated set of common-sense protections that work effectively both when interest rates are higher than normal, like today, and when interest rates are lower than normal, like during the COVID years.”

Industry leaders are holding out hope that maybe Routledge will heed the sector’s calls and make the necessary adjustments. Others think that the OSFI will only intensify the stress test, adding to borrowers’ growing costs.

Courtesy RE/MAX Canada

The Bank of Canada today held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is continuing its policy of quantitative tightening.

The global economy continues to slow and inflation has eased further. In the United States, growth has been stronger than expected, led by robust consumer spending, but is likely to weaken in the months ahead as past policy rate increases work their way through the economy. Growth in the euro area has weakened and, combined with lower energy prices, this has reduced inflationary pressures. Oil prices are about $10-per-barrel lower than was assumed in the October Monetary Policy Report (MPR). Financial conditions have also eased, with long-term interest rates unwinding some of the sharp increases seen earlier in the autumn. The US dollar has weakened against most currencies, including Canada’s.

In Canada, economic growth stalled through the middle quarters of 2023. Real GDP contracted at a rate of 1.1% in the third quarter, following growth of 1.4% in the second quarter. Higher interest rates are clearly restraining spending: consumption growth in the last two quarters was close to zero, and business investment has been volatile but essentially flat over the past year. Exports and inventory adjustment subtracted from GDP growth in the third quarter, while government spending and new home construction provided a boost. The labour market continues to ease: job creation has been slower than labour force growth, job vacancies have declined further, and the unemployment rate has risen modestly. Even so, wages are still rising by 4-5%. Overall, these data and indicators for the fourth quarter suggest the economy is no longer in excess demand.

The slowdown in the economy is reducing inflationary pressures in a broadening range of goods and services prices. Combined with the drop in gasoline prices, this contributed to the easing of CPI inflation to 3.1% in October. However, shelter price inflation has picked up, reflecting faster growth in rent and other housing costs along with the continued contribution from elevated mortgage interest costs. In recent months, the Bank’s preferred measures of core inflation have been around 3½-4%, with the October data coming in towards the lower end of this range.

With further signs that monetary policy is moderating spending and relieving price pressures, Governing Council decided to hold the policy rate at 5% and to continue to normalize the Bank’s balance sheet. Governing Council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed. Governing Council wants to see further and sustained easing in core inflation, and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians.

Courtesy the Bank of Canada

NOVEMBER 2023 HOUSING MARKET UPDATE

December 1, 2023

Increased listings, strong sales, and price growth.

New listings in November reached 2,227 units, nearly 40 per cent higher than the exceptionally low levels reported last year at this time. Gains in new listings occurred across most price ranges, but the most significant gains occurred from homes priced over $600,000.

Despite the year-over-year jump in new listings, inventory levels remained low thanks to relatively strong sales. With 1,787 sales in November, the sales to new listings ratio remained high at 80 per cent, and the months of supply remained below two months.

“Like other large cities, new listings have been increasing,” said CREB® Chief Economist Ann-Marie Lurie. “However, in Calgary, the gains have not been enough to change the low inventory situation thanks to strong demand. Our market continues to favour the seller, driving further price growth.”

As of November, the benchmark price was $572,700, up over last month and nearly 11 per cent higher than November 2022. Year-to-date, the average benchmark price has risen by over five per cent.

Detached

Limited supply choice for homes priced below $700,000 has been the primary cause of the decline in detached home sales. While November reported a marginal gain over last year, year-to-date sales have declined by 20 per cent. November saw a rise in new listings compared to the previous year, but higher-priced homes drove most gains. This has left the detached market with exceptionally tight conditions for prices below $700,000 and more balanced conditions for higher-priced homes. Overall, the month of supply remains exceptionally low at under two months.

Persistently tight conditions continue to cause further price gains in the detached market. As of November, the unadjusted benchmark price reached $699,500, a slight increase over last month and over 13 per cent higher than last November. While detached home prices are much higher than last year's levels in every district, year-to-date gains are the highest in the most affordable districts of the North East and East. 

Semi-Detached

November saw a boost in new listings compared to last year, helping to prevent a year-over-year decline in inventory levels. However, inventory levels are still over 40 per cent below typical levels seen in November. With a sales-to-new-listings ratio of 77 per cent and a month-of-supply below two months, conditions remain exceptionally tight, especially for homes priced below $700,000. 

Despite tight conditions, benchmark prices remained stable compared to last month. However, at an unadjusted benchmark price of $628,700, prices are still over 12 per cent higher than last year. The year-to-date average benchmark price has risen by nearly seven per cent, with the largest gains occurring in the North East and East districts.

Row

New listings rose again this month compared to last year. The 370 new listings were met with 267 sales, and for the first time since 2021, the sales-to-new-listings ratio fell below 75 per cent. The jump in new listings was enough to support a gain in inventory levels compared to last month and last year. While inventories are still nearly half the levels we traditionally see, this did help cause the months of supply to push up to 1.6 months, a significant improvement from the less than one month of supply that has persisted over the past seven months. While conditions are much more balanced in the higher price ranges, there is less than one month of supply for homes priced below $500,000.

Despite the shift away from exceptionally tight conditions, prices still rose over the last month and last year. As of November, the unadjusted benchmark price reached $429,100, 21 per cent higher than last November and an average year-to-date gain of nearly 13 per cent.

Apartment Condominium

Thanks to the relative affordability of the apartment-style homes, sales continued to reach record highs in November, contributing to year-to-date sales of 7,487. With one month left in the year, sales have already surpassed last year’s record high. This, in part, was possible thanks to the growth in new listings. While inventory levels are similar to levels reported last year, with less than two months of supply, conditions still favour the seller, placing further upward pressure on prices. 

The unadjusted November benchmark price reached $320,100 in November, a monthly gain of over one per cent and a year-over-year increase of 18 per cent. Year-to-date price gains have occurred across every district in the city, with some of the largest gains arising in the lower-priced North East and East districts.

REGIONAL MARKET FACTS

Airdrie

Gains in November sales were not enough to offset earlier pullbacks, leaving year-to-date sales down by over 26 per cent over last year's record levels. Much of the decline has been driven by the detached market, which has struggled with supply, especially in the lower price ranges. New listings in November did improve over last year's levels. Still, thanks to the gain in sales, the sales-to-new listings ratio rose to 96 per cent, preventing any significant shift from the low inventory levels. 

With less than two months of supply, we continue to see upward pressure on home prices. In November, the unadjusted benchmark price rose over last month, reaching $524,500, a year-over-year gain of 11 per cent. Year-to-date price gains have been the highest in the apartment sector at 17 per cent, with detached and semi-detached prices rising by nearly six per cent.

Cochrane

With 87 new listings and 51 sales, the sales-to-new listings ratio fell to 59 per cent in November, the first time it fell below 60 per cent since 2020. Higher-priced properties have primarily driven the recent gain in new listings. Improved new listings compared to sales did help support increases in inventory levels. However, November inventory levels remain over 30 per cent below long-term trends.

Tight market conditions have supported further price growth in Cochrane. As of November, the unadjusted benchmark price reached $548,600, a monthly gain of over one per cent and a year-over-year increase of 11 per cent. On average, year-to-date benchmark prices have increased across all property types, with the most significant gains occurring in the apartment condominium sector at over seven per cent. 

Okotoks

November saw a boost in new listings, helping support some of the year-over-year gain in sales. The rise in new listings compared to sales also helped support gains in inventory levels. However, inventory levels are nearly half what we would typically see in the market in November. Nonetheless, the shift this month did help push the months of supply up to nearly two months. 

While the months of supply did improve, conditions remained exceptionally tight, and prices continued to trend up this month. As of November, the unadjusted benchmark price was $590,200, a one per cent gain over last month and over eight per cent higher than last November.

Click here to view the full City of Calgary monthly stats package.

Click here to view the full Calgary region monthly stats package.

The Calgary Real Estate Board (CREB®) has released its Q3 2023 housing market report, providing a comprehensive overview of the real estate landscape in the City of Calgary and surrounding areas. The report showcases trends in sales and pricing, offering valuable insights for industry professionals and prospective homebuyers and sellers.

“Sales activity in the Calgary market has followed expectations, with declines earlier in the year offsetting gains in the second half,” said CREB® Chief Economist Ann-Marie Lurie. “Thanks to persistent supply challenges, the market has favoured sellers, resulting in stronger-than-expected price growth. As we move into 2024, we expect to see better supply-demand balances, but given the strong migration levels over the past two years, supply adjustments will take time to support further price gains.”

Higher interest rates and inflation levels are expected to weigh on consumer spending and business investment, slowing economic growth in 2024. However, thanks to higher commodity prices and migration levels, economic activity in Alberta is expected to outpace national growth levels.

Supply challenges impacted both sales and prices in the Calgary market last year. As we move into 2024, a rise in new listings and an improved number of starts are projected to offer more supply choices; this, along with population gains and a stable employment market, is expected to support stronger sales this year. And as we shift toward more balanced conditions, the pace of price growth is expected to slow from the high levels reported in 2023.

While both sales and prices are expected to rise in 2024, there is considerable risk to the outlook. Shifts in global growth could impact commodity prices and, ultimately, our economic growth, employment, and migration. Migration and employment shifts will influence the path to housing market balance and the rate of price growth experienced in our city.

For the full report, please download CREB®’s Q3 2023 Calgary & Region Quarterly Update Report here.

Courtesy CREB®

October sales activity slowed over the last month in alignment with typical seasonal patterns. However, with 2,171 sales, levels were 17 percent higher than last year and amongst the highest levels reported for October. Sales activity has been boosted mainly through gains in apartment condominium sales as consumers seek affordable housing options during this period of high interest rates.

New listings also improved this month compared to last year, reaching 2,684 units, reflecting the highest October levels reported since 2015. Despite the gain, relatively strong sales prevented any significant shift in inventory levels, which remain over 40 percent lower than levels traditionally available in October.

“Despite some recent improvements in new listings, supply levels remain challenging in our market,” said CREB® Chief Economist Ann-Marie Lurie. It will take some time to see a shift toward more balanced conditions and ultimately more price stability.”

With a months of supply of one and a half months, we continue to experience upward pressure on home prices. The unadjusted benchmark price in October reached $571,600, a gain over last month and nearly 10 percent higher than last October.

Detached

Both sales and new listings improved over levels reported last October. However, with 1,302 new listings this month and 976 sales, inventory levels slowed over the last month. Inventory levels remain the lowest ever reported for October. Inventory levels have declined for all homes priced below $700,000, leaving conditions exceptionally tight for lower-priced homes. The only area where conditions are not as tight as last year is for homes priced above $1,00,000, where the months-of-supply has risen to 4.3 months.

Persistently tight conditions continue to cause further price gains in the detached market. As of October, the unadjusted benchmark price reached $697,600, a slight increase over last month and 12 percent higher than last October. Prices trended up over the last month across every district except the South East. Year-to-date benchmark prices have increased the most in the North East and East districts.

Semi-Detached

New listings in October improved over the low levels reported last year. However, with 235 new listings and 179 sales, the sales to new listings ratio remained relatively high at 76 percent, preventing any significant change in the inventory levels. Inventory levels are nearly half the levels traditionally seen in October and have not been this low since October 2005.

Persistently tight conditions have continued to support price growth. In October, the unadjusted benchmark price increased over the last month, reaching $628,700, a year-over-year gain of 13 percent. Prices trended up over September across most districts, with the most significant monthly gain occurring in the City Centre district. Like the detached sector year-to-date, the highest price growth has happened in the most affordable districts of the North East and East.

Row

The 420 new listings this month were met with 375 sales, keeping the sales-to-new listings ratio high at 89 percent and preventing a significant shift in inventory levels. Row inventory levels have not been this low since October 2005. At the same time, October sales reached a record high for the month, keeping the months of supply low at one month.

Persistently tight market conditions have supported further gains in prices this month. In October, the unadjusted benchmark price reached $425,200, a monthly gain of over one percent and nearly 19 percent higher than last October. Prices have risen across most districts, but this month, the largest monthly gain occurred in the City Centre, which has also seen the lowest year-to-date price growth compared to the other districts.

Apartment Condominium

Record high sales in October were possible thanks to the steep gain in new listings.   However, with 727 new listings and 641 sales, the sales-to-new listings ratio remained high at 88 percent, and inventories continued to trend down. The decline in inventory levels has been driven mostly by condos priced below $300,000, which now represent only 38 percent of all inventory, a significant decline compared to the 53 percent reported last year.

Persistent seller market conditions have driven much of the recent gains in prices. The unadjusted October benchmark price reached $316,600 in October, a monthly gain of over one percent and a year-over-year increase of 16 percent. Year-to-date price gains have occurred across every district in the city, with some of the largest gains arising in the lower-priced North East and East districts.

REGIONAL MARKET FACTS

Airdrie

Sales in the city eased in October, contributing to the year-to-date decline of 29 percent. Much of the decline has been driven by detached home sales. Limited supply choice in the lower price ranges has contributed to some steep drop in home sales priced below $500,000. While Inventory levels have improved over last year's low levels, the growth was driven by homes priced above $500,000.

While adjustments in both sales and inventory levels did cause the months of supply to trend up over the last month, with less than two months of supply, conditions remain tight, supporting further price gains. In October, the benchmark price rose over the last month, reaching $521,400, a year-over-year gain of nearly 10 percent.

Cochrane

New listings improved over last month's and last year’s levels, likely supporting some of the monthly gains in sales. Nonetheless, year-to-date sales have eased by nearly 22 percent as sales have eased across all property types. While sales have slowed, levels remain far higher than long-term trends for the town. Despite the monthly improvement in new listings, inventory levels were lower than last year and remain well below long-term trends.

Persistently tight market conditions supported further price growth this month. In October, the unadjusted benchmark price reached $539,900, a monthly gain of over one percent and a year-over-year increase of seven percent. Price growth has occurred across all property types, with the largest year-over-year gains occurring in the apartment condominium sector. 

Okotoks

The 48 new listings in October were met with 41 sales, keeping the sales-to-new listings ratio high at 85 percent and preventing any adjustments to the exceptionally low inventory levels. Low inventory levels have likely prevented stronger sales activity, as year-to-date sales have declined by 26 percent, primarily due to pullbacks in detached activity.

Despite some price adjustments over the last few months, the unadjusted benchmark price rose slightly over September and was over nine percent higher than last October. Prices have increased across all property types, but the year-over-year gains have been highest for detached and semi-detached homes.

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Courtesy of the Calgary Real Estate Board

The Bank of Canada decided to maintain its target for the overnight lending rate at 5%.

In its latest scheduled interest rate announcement on October 25, 2023, the Bank cited growing evidence of a slowdown in economic activity due to past interest rate increases, which were also helping to relieve inflation. The Bank noted reduced consumption and resale housing activity as contributing factors to weaker economic activity, but that labour market conditions were still tight.

In its Monetary Policy Report, the Bank also highlighted forest fires and the federal public sector strike as weighing on the economy earlier this year. The Bank said it expects economic growth to remain subdued until late 2024, with the Canadian economy set to grow only 0.9% in 2024 compared with 1.2% this year before picking up to 2.5% in 2025.

Given the fluctuations in recent months, the Bank has made note of the volatility in inflation while also citing diverging trends in components of the Consumer Price Index (CPI). While some goods and food inflation has come down, costs relating to shelter are still growing at strong rates and the Bank’s own measure of core inflation is not showing signs of slowing. Although inflation is still expected to return to the Bank’s 2% target in 2025, near-term inflation will be anticipated to run higher due to recent increases in energy prices and other components of core inflation.

The Bank was relieved to see that higher interest rates are having their intended effect on spending and price growth but remains concerned about inflation progressing back to its target range at a slower pace. Although the policy rate was held at 5%, it’s still prepared to hike rates further if necessary.

The Bank of Canada’s next scheduled interest rate announcement will be on December 6, 2023. The next Monetary Policy Report will be published on January 24, 2024.

Over the past few months, more sellers have entered the housing market, particularly in September with a surge of new listings in all major Canadian markets. This is thanks to several things, notably rising borrowing costs from higher interest rates, as the latest report from Robert Hogue, assistant chief economist at RBC Economics, notes.

Rising interest rates | a push-pull effect

That said – at the same time, these higher rates drive away buyers and weaken demand, resulting in a more relaxed market. This is particularly happening in Ontario and British Columbia, followed by Calgary. Many locales – like Toronto, Vancouver and the Fraser Valley – are favouring buyers, or close to it.

The report states that prices are declining, albeit slightly, as the August and September MLS Home Price Index fell month-over-month for Toronto, Vancouver and the Fraser Valley. In Calgary, prices rose and demand-supply stayed tight.

“We expect little change in this broad picture in the months ahead. We think buyers will stay on the defensive in many parts of Canada despite more choices becoming available to them,” shares Hogue. He warns, “High-interest rates, ongoing affordability issues and a looming recession are poised to pose major obstacles. Any material acceleration in the market recovery will have to wait until interest rates come down in 2024.”

The Greater Toronto Area | the balance edges toward buyers

GTA buyers dealt with low inventory but now have more housing options available, with more sellers back on the market. In September, new listings went up by 11 percent, representing the sixth consecutive monthly increase. Yet, sales declined again, this time by 1.8 percent month-over-month. The culprits of this trend are low affordability, high-interest rates and increasing economic uncertainty.

As for prices, a looser demand and supply environment is bringing them down – the Home Price Index lowered month-over-month by about 0.2 percent in August and 0.8 percent in September.

“We expect further erosion in the near term with buyers holding a stronger bargaining position,” Hogue shares. 

Vancouver | quickly softening

Demand-supply conditions in Vancouver have moved fast since June and were on the softer side last month. This is due to notable inventory boosts, especially in September, and cautious buyers (thanks to low affordability and high-interest rates).

“The upshot of this rapid shift has been an end to the price rally that began this winter,” Hogue comments. Indeed, Vancouver’s Home Price Index declined 0.2 percent and 0.4 percent month-over-month, respectively in August and September. He predicts that with rising inventories and new listings above pre-pandemic numbers, prices will trend downward.

Montreal | market recovery is slow with opposing sides

The Montreal market has been slow but is incrementally recovering from the sharp correction it endured in 2022. In September, resales went up nearly 9 percent from the same time last year and over 2 percent from last month.

“Two forces are at play: on one side, an influx of sellers since spring has helped unlock some pent-up demand; on the other, higher interest rates have made it more difficult for buyers to afford a home purchase – muting momentum,” explains Hogue. He notes things have eased between the demand and supply balance, and this maintains overall prices.

Last month, prices for Montreal area condominium units jumped 2.3 percent month-over-month but dropped over 2 percent for detached homes. However, prices of both home types went up a bit from September 2022. Hogue expects similar results over the coming months.

Calgary | on fire

The boom in Calgary’s population (thanks to less expensive home ownership costs than Ontario and B.C.) has the market buzzing. “This is attracting droves of buyers, and driving up real estate transactions and prices to historical highs,” Hogue notes.

For the sixth month in a row, sales went up last month (by about 4 percent month–over–month). Supply is trailing demand, though it continues to grow at a steady pace – keeping the buyer-competitive market favouring sellers.

Compared to Canada’s largest markets, the city’s Home Price Index went up the most in the last year – by 8.7 percent.

“Calgary is easily the tightest (and hottest) market in Canada at the moment … we think upward price pressure isn’t about to let up anytime soon,” shares Hogue.

Courtesy RBC Canada

SEPTEMBER 2023 HOUSING MARKET UPDATE

October 3, 2023

Calgary home sales at record highs in September, yet supply remains a challenge

Sales reached another record high in September with 2,441 sales. Despite the year-over-year gains reported over the past four months, year-to-date sales are still nearly 12 per cent lower than last year's levels.

New listings also improved this month compared to last year and relative to sales. This caused the sales-to-new listings ratio to fall to 76 per cent, preventing further monthly declines in inventory levels.

Nonetheless, inventory levels in September remained over 24 per cent lower than levels seen last year and, when measured relative to sales activity, has not changed enough to cause any significant shift in supply and demand balances. As of September, the months of supply has remained relatively low at less than two months.

“Supply has been a challenge in our market as strong inter-provincial migration has elevated housing demand despite higher lending rates,” said CREB® Chief Economist Ann-Marie Lurie. “While new listings are improving, it has not been enough to take us out of sellers’ market conditions.”

In September, the unadjusted residential benchmark price was $570,300, similar to last month and nearly nine per cent higher than last year.

Detached

Inventory levels remained at record lows for the month as the sales-to-new listings ratio remained relatively high at 76 per cent. The decline in inventory levels has been driven by homes priced below $700,000, as supply levels show some improvement for homes priced above this level. While detached sales improved over levels reported last year, much of the gains were driven by the higher-priced properties with some supply options. Overall, homes priced below $700,000 continue to struggle with less than one month of supply.

Despite persistently tight market conditions, the unadjusted benchmark price remained relatively stable this month compared to last month, as a monthly price adjustment in the West end of the city offset monthly gains in all other districts. Overall, at a benchmark price of $696,100, prices are still over 11 per cent higher than levels reported last year at this time, with year-over-year gains ranging from a high of 20 per cent in the East district to a low of nine per cent in the City Centre.

Semi-Detached

September reported a boost in new listings compared to sales activity as the sales-to-new listings ratio dropped below 70 per cent, the first time it has done that since September of last year. The one-month shift supported a monthly increase in inventory levels, but with 295 units available, inventories have not been this low since September 2005.

Following ten consecutive monthly price gains, benchmark prices in September did ease slightly over the last month. However, at a benchmark price of $621,300, prices are still 11 per cent higher than last year’s levels. The monthly pause in price was primarily driven by adjustments in the West and North West districts, which saw the months of supply rise above levels reported last year and last month.

Row

The pullback in monthly sales outpaced the pullback in new listings, causing the sales-to-new listings ratio to fall to 84 per cent. While conditions are still exceptionally tight, it is an improvement over the 90 per cent average reported since April. The shift also prevented any further monthly declines in inventory levels. However, with less than one month of supply, the persistently tight conditions continue to place upward pressure on prices.

The benchmark price in September reached $419,400, a 1.5 per cent monthly gain and 17 per cent higher than levels reported last year. Price gains have occurred across all districts, with the most significant gains occurring in the most affordable districts in the city.

Apartment Condominium

New listings in September were at the highest levels reported for September, contributing to the record-high sales this month. Year-to-date apartment condominium sales reached 6,286 sales, a 25 per cent gain over last year and a record high for the city. Higher lending rates and tight rental market conditions have kept demand for apartment-style products strong. While inventory levels did see a modest gain compared to last month, thanks to a lower sales-to-new-listings ratio, conditions remain exceptionally tight with 1.5 months of supply.

The persistently tight market conditions have continued to drive further price gains. In September, the unadjusted benchmark price reached $312,800, a 1.2 per cent increase over last month and nearly 15 per cent higher than last year.

REGIONAL MARKET FACTS

Airdrie

With 204 new listings and 144 sales, the sales-to-new-listings ratio dropped to 70 per cent, the first time that has happened since 2020. Improved new listings compared to sales helped support a modest monthly gain in inventory levels. However, September inventory levels are still amongst the lowest levels reported since 2005, keeping the months of supply exceptionally low with just over one month.

The persistently tight market conditions have continued to drive further price gains in the city. In September, the unadjusted benchmark price reached $518,000, reflecting a year-over-year increase of over eight per cent. Price gains have occurred across all property types, with the largest year-over-year gains occurring in the apartment condominium sector.

Cochrane

Both sales and new listings eased in September, leaving inventory levels relatively stable this month. While inventories are nearly 40 per cent lower than long-term trends for the month, they are not at the record lows seen. The pullback in sales compared to inventory levels also caused the months of supply to push up above two months, the first time we have seen that since February.

While conditions remain relatively tight, the shift likely prevented further upward pressure on monthly home prices. The unadjusted benchmark price in September was $532,700, slightly lower than last month due to pullbacks in the detached, semi-detached and row sectors. Despite the monthly pause, total residential prices are still over five per cent higher than September 2022 levels. 

Okotoks

With 69 new listings and 52 sales, the sales-to-new listings ratio dropped to 75 per cent in September, the lowest ratio seen since August 2022. The gain in new listings relative to sales prevented any further monthly declines in inventory levels. However, with only 70 units available in September, inventory levels are still amongst the lowest reported monthly levels in over 20 years.

The modest adjustment in both inventory and sales did cause the months of supply to rise over last month’s levels. Still, conditions remain relatively tight, especially for semi-detached, row and apartment-style properties. As of September, the unadjusted benchmark price was $580,200, nearly nine per cent higher than last year.

Click here to view the full City of Calgary monthly stats package.

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AUGUST 2023 HOUSING MARKET UPDATE

September 1, 2023

Thanks to a surge in the condominium market, August sales reached a record high with 2,729 sales. Despite the record levels reported over the past several months, year-to-date sales are still down by 15 per cent compared to last year.

While new listings did improve compared to levels seen this time last year, the sales-to-new-listings ratio remained elevated at 87 per cent, preventing any significant shift from the low inventory situation. Inventory levels in August dropped to 3,254 units, not only a record low for the month but well below the 6,000 units that are typically available. Low inventory combined with high sales this month ensured the months of supply remained low at just over one month.

“Higher lending rates have caused many buyers to either hold off on purchase decisions or shift toward more affordable products on the market,” said CREB® Chief Economist Ann-Marie Lurie. “The challenge has been the availability of supply, especially in the detached market. Inventory levels hit record lows in August, and while new listings are higher than last year, conditions continue to favour the seller, driving further price gains.”

The unadjusted benchmark price reached $570,700 in August, representing the eighth consecutive monthly gain. Prices have trended up across all property types, with row-style properties reporting the largest increase.

Detached

Record low inventory levels this month were primarily driven by pullbacks for homes priced under $700,000. While new listings did improve compared to last year, most of the growth was driven by homes priced over $700,000. August sales did improve over last year’s levels. However, limited supply in the lower price ranges has likely prevented stronger detached home sales.

Persistently tight conditions drove further price gains this month. As of August, the unadjusted benchmark price reached $696,700. Nearly one per cent higher than last month and over 10 per cent higher than last year's levels. The highest year-over-year price gains occurred in the most affordable regions of the city's North East and East districts.

Semi-Detached

The 236 new listings and 197 sales did little to change the low inventory situation. While inventory levels did remain comparable to last month, they are still 35 per cent below last year’s levels and at record lows for the month. Relatively strong sales combined with low inventory levels have given sellers the advantage.

With months of supply remaining exceptionally low throughout 2023, we continue to see upward pressure on home prices. As of August, the semi-detached unadjusted benchmark price reached $623,200, a monthly gain of one per cent and 10 per cent higher than last year. Price growth did range across each of the Calgary districts, but the strongest year-over-year gains were reported in the most affordable districts of the North East and East.

Row

The gain in new listings did little to offset the strong sales activity as the sales-to-new-listings ratio remained high at 94 per cent. This prevented any additions to the inventory and left the months of supply below one month for the fifth consecutive month.

The persistently tight conditions placed further upward pressure on home prices. In August, the unadjusted benchmark price reached $413,200, a monthly gain of over one per cent and nearly 16 per cent higher than levels reported last year. Year-over-year gains have occurred across all districts, ranging from 12 per cent in the North West to 29 per cent in the East district.

Apartment Condominium

August sales continue to rise over last month and last year’s levels. Recent gains have caused year-to-date sales to reach 5,582 units, nearly 22 per cent higher than last year’s levels and a new record high for the city. Tight rental markets and relative affordability have driven many purchasers to the apartment condominium sector. At the same time, new listings have struggled to keep pace as the sales-to-new-listings ratio bumped up to 98 per cent in August, causing inventories to ease and the months of supply to drop to one month.

The tight market conditions have been placing upward pressure on home prices, and as of August, the unadjusted benchmark price reached $309,100, a monthly gain of over one per cent and a year-over-year gain of over 13 per cent. The City Centre is the only district that did not report a monthly price gain, and prices are still below their previous highs in 2014. This is partly due to better supply/demand balances in the City Centre compared to other parts of the city.

REGIONAL MARKET FACTS

Airdrie

With 204 sales and 206 new listings, the sales-to-new-listings ratio pushed up to 99 per cent, causing inventory levels to decline. With only 176 units available in inventory, the months of supply once again dropped below one month.

The persistently tight market conditions continued to place upward pressure on home prices. In August, the unadjusted benchmark price reached $515,600, up from last month and nearly six per cent higher than last year's.

Cochrane

Following several months of inventory gains, August saw inventory levels fall to 144 units due to a pullback in new listings. While sales did improve compared to last year, the pullback in new listings caused the sales-to-new-listings ratio to increase to 91 per cent. Meanwhile, the months of supply remained below two months, not as tight as what is being experienced in Airdrie but far lower than what we would typically expect in the town.

The persistently tight market conditions drove further price gains this month. The unadjusted benchmark price reached $534,700 in August, nearly one per cent higher than last month and over four per cent higher than last year’s levels. Prices trended up across all property types, but the most significant monthly gains occurred in the relatively affordable apartment condominium sector.

Okotoks

The 59 sales in August were met with 65 new listings in the month, causing further retractions to the already low inventory levels. With only 64 units available, Inventory levels hit a new record low for August. The drop in inventory also caused the months of supply to remain low at one month.

Despite the tight market conditions, benchmark prices decreased from last month’s high. The monthly variation is not uncommon for smaller centres, and it is important to note that with a benchmark price of $582,000, prices remain seven per cent higher than last year's levels and 10 per cent higher than where we were at the start of the year.

Click here to view the full City of Calgary monthly stats package.

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