Ernie Apostal

Before we could even roll out the red carpet for spring, the latest housing data is suggesting Canada’s real estate markets could be in for a busy season.

The Canadian Real Estate Association (CREA) is reporting national home sales rose 2.3% month-over-month in February, led by gains in the Greater Toronto Area and Greater Vancouver.

That, coupled with the fact the year-over-year average price is down 18.9% compared to the same time last year, may suggest Canadians will be feeling more confident in re-entering the market this year—especially if it’s the end to rapidly rising interest rates.

Residential average price and housing data for real estate markets across Canada

The actual (not seasonally adjusted) average Canadian sale price in February 2023 was $662,437—a far cry from the home price record of $816,578 in February 2022. Excluding the Toronto and Vancouver markets (which actually bumped the national average price up $50,000 month-over-month), you can cut almost $135,000 from the national average price in February 2023.

“February’s data contained the potential of a more robust market to come, but to repeat the bottom line from last month, we won’t know what the 2023 market has in store until the spring,” said Jill Oudil, Chair of CREA.

What other signs are pointing to busier real estate markets?
The increase in home sales month-over-month comes at the same time there was a significant drop in new listings. The number of newly listed properties dropped 7.9% in February compared to January, further tightening the sales-to-new-listings ratio. Months of inventory also dropped slightly—the first time we’ve seen such a move since the fall of 2021.

“[We’re seeing] tighter market conditions all around and that should help firm up prices, which I suspect some buyers are waiting to see before they enter the market this year, so that’s good news,” said CREA’s Senior Economist Shaun Cathcart in CREA’s

Bank of Canada pauses interest rate hikes but continues quantitative tightening

After eight successive rate hikes the Bank of Canada has decided to maintain its target for the overnight lending rate at 4.5%, while continuing its policy of quantitative tightening.

The Bank indicated global economic developments have evolved in line with their expectations amidst a backdrop of slowing global growth and easing inflationary pressures. However, China’s economic recovery along with the Russia-Ukraine war were cited as key sources of upside risk. According to the Bank, overall financial conditions have tightened in recent months along with the Canadian dollar losing value against its U.S. counterpart.

According to the Bank, fourth quarter economic growth in Canada was flat and came in below expectations, due mainly to a falloff in inventory investment. The Bank added that tight monetary policy continues to weigh on household spending and business investment amidst slowing domestic and foreign demand. Notwithstanding, the labour market remains vibrant as evidenced by strong job gains, historically low unemployment, increased job vacancies, and wage growth in the range of 4-5%.

Inflation eased to 5.9% in January, driven mainly by lower prices for energy, durable goods, and some services. The Bank acknowledged the hardships being faced by many Canadians, as food and shelter costs continue to rise. According to the Bank, price pressures, particularly in the product and labour markets, are expected to ease in line with weak economic growth over the next few quarters, leading to a moderation in wage growth and increased price competition among firms.

Overall, the Bank is of the view that recent data is in line with their expectation for Consumer Price Index inflation to fall to 3% by the middle of this year. Looking ahead, the Bank noted it will continue to assess economic conditions and is prepared to resume raising rates if necessary to return inflation to its 2% target.

The Bank of Canada’s next scheduled interest rate announcement will be on April 12, 2023, at which time it will publish its next Monetary Policy Report.