Real Estate Upswing in December

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After an uneventful November and the tension of a cooling year-end market, the national real estate figures for December have defied expectations. A surprising upswing of 8.7% monthly compared to November, with 38,135 property transactions. On an annual basis, sales activity saw a 3.7% increase.
Real Estate Upswing in December

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After an uneventful November and the tension of a cooling year-end market, the national real estate figures for December have defied expectations. A surprising upswing of 8.7% monthly compared to November, with 38,135 property transactions. On an annual basis, sales activity saw a 3.7% increase.

The Canadian Real Estate Association (CREA) reported a noteworthy 5.1% decrease in new listings, contributing to tightened market conditions and a slight upward push on home prices. The national average climbed by 5.1% year over year to $657,145.

December witnessed the national sales-to-new listings ratio (SNRL) to 57.8%, surpassing the long-term average of 55%. According to CREA, this indicates largely balanced conditions. Ratios below 40% suggest buyers’ markets, while those above 60% point to seller-friendly conditions. The overall inventory remained low at 3.8 months, down from 4.2 in November and well below the long-term trend of five months.

While the stronger sales and decreased new listings in December might suggest renewed buyer enthusiasm, CREA analysts caution against premature celebrations of a market recovery. Shaun Cathcart, CREA’s Senior Economist, stated, “It was more likely just some of the sellers and buyers that were holding onto unrealistic pricing expectations last fall finally coming together to get deals done before the end of the year.”

The real test for the market’s resilience, according to CREA Chair Larry Cerqua, will come as the weather warms, marking the beginning of the typically busy spring season. Cerqua stated, “While December did offer up a bit of a surprise in sales numbers to cap the year, the real test of the markets’ resilience will be in the spring.”

In December, Ontario markets continued to experience the most significant price declines, particularly within the Greater Golden Horseshoe region. Home prices there had surged dramatically during the pandemic and have been undergoing significant corrections since the Bank of Canada’s hiking cycle began in March 2022. Price growth has slowed in British Columbia while rising in other provinces like Alberta, New Brunswick, and Newfoundland and Labrador.

Despite the December uptick, 2023 concluded with a total of 443,511 sales, marking an 11.1% decline from 2022. CREA acknowledges this as technically the lowest annual level for national sales activity since 2008, similar to challenging market years following the financial crisis and the introduction of the uninsured mortgage stress test in 2018.

Looking ahead, CREA released a forecast for housing market activity in 2024 and 2025, expressing optimism over potential rate cuts and pent-up buyer demand. However, the association recognizes that the market is still recovering from sharp declines in 2023.

The forecast for 2024 anticipates a modest bounce-back, with CREA expecting a total of 489,661 homes to be sold, a 10.4% increase from the previous year. Sales recovery is predicted to be concentrated in provinces with strong housing demand, such as Alberta, while markets with historically low sales volume, including Ontario, BC, and Nova Scotia, are expected to make a comeback. The national average home price is projected to rise by 2.3% to $694,173 in 2024.

Continued momentum is forecasted for 2025, with sales reaching 525,498 units, representing a 7.3% increase, and the national average home price rising by 4% to $722,063.

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