CREA lowers home price forecast after September dip in sales, prices

Houses for sale in Ottawa

National sales-to-new listings ratio below long-term average for first time since January

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Slowdowns in the Ontario and B.C. housing markets have led the Canadian Real Estate Association to lower its forecast for the national average home price for 2023.

In a release on Oct. 13, CREA said it now expected the national average to decline by 3.3 per cent to $680,686 for the year. In July, CREA had hiked the home price forecast to $702,409 — nearly flat with 2022 levels — after a stronger-than-expected spring season.

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The downward revision came after Canadian home sales dipped slightly in September on a month-over-month basis and new listings surged, sending the national sales-to-new listings ratio below its long-term average for the first time since January, according to CREA’s monthly data.

Lower sales-to-listings ratios are considered indicators of softness in the market, potentially giving buyers an upper hand.

Sales for the month were down 1.9 per cent from August, but were 1.9 per cent higher than September 2022. New listings, meanwhile, jumped by 6.3 per cent month over month. The sales-to-new listings ratio declined to 51.4 per cent from 55.7 per cent in August, below the long-term average of 55.2 per cent.

The MLS Home Price Index (HPI) declined slightly by 0.3 per cent from the prior month, yet is still up 1.1 per cent year-over-year. The national average sale price, without seasonal adjustment, rose by 2.5 per cent to $655,507 compared to the same month last year.

Sales to new lisings ratiio housing chart

Slower sales in Greater Vancouver and the Greater Toronto Area were counterbalanced by gains in Edmonton, Montreal and the Kitchener-Waterloo region.

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“The recent trend of slowing sales and rising new listings continued in September,” Larry Cerqua, chair of CREA said in the release. “This presents an opportunity for buyers, although many of them seem content to stick to the sidelines until there’s more evidence that interest rates are indeed finally at the top. This, combined with sellers who, by and large, do not need to sell, means the market will likely remain on the slower side until next year.”

Moving forward to 2024, CREA anticipates a 1.5 per cent rise for the year to $690,916. This means the national average price would, for the fourth year running, remain within the $680,000-$700,000 range, a trend seen in past stretches like 2016-2019 and the 1990s.

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CREA’s data also suggests Alberta will remain a bright spot for housing next year.

“Prices in Alberta are expected to outperform the rest of Canada in 2024, with a forecast gain of 4.8 per cent compared to 2023,” CREA said in the release. “In contrast, Ontario is forecast to see virtually no growth in prices next year (0.2 per cent). Modest price growth in the 1 per cent to 2.5 per cent range is forecast for other provinces in 2024.”

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CREA said it is monitoring the economy and interest rates for changes that could alter these forecasts.

“The major risk to this forecast remains what happens with the data that the Bank of Canada is eyeing and what that means for its key policy interest rate between now and next spring,” CREA said. “The current assumption is either no more hikes, or at most one more, along with some indication from the Bank at some point that the next move will likely be down.”

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