In February, total home sales in Canada rose 2.3% from the month prior. This jump may well be indicative of more activity to come, although it’s still early to call. Speaking on behalf of the Canadian Real Estate Association (CREA), Chair Jill Oudil explains that spring will really show us what the 2023 market has in store.
Inventory, or the number of homes available on the market, is still low in most areas, and mortgage rates are still high—so why are home sales beginning to rise now? Although home sales are increasing, it’s important to note that sales are still down year-over-year. February 2022 was a massive month for sales, so the number of transactions dropped by 40% year-over-year. That may sound shocking, but February 2022 was an outlier. When we compare it to pre-pandemic years, this February stacks up with 2018 and 2019.
CREA also reported that home prices have dropped 15.8% year-over-year.
Does this dramatic year-over-year price drop mean the market will crash? Not quite.
Again, we have to put that number in perspective. The ultra-low inventory and extreme demand of pandemic-era homebuying caused prices to skyrocket and pushed many buyers out of the market. Canadian prices peaked in February 2022, marking an all-time high for the country. The current decrease is simply a correction from those sky-high prices, a relaxation of extremely tight market conditions—and a result of high mortgage rates.
But what’s to prevent prices from continuing to drop—and even heading into crash territory? Inventory across the country remains low. There’s only a 4.1-month supply of homes in Canada at the current rate of sale, which is a full month below the long-term average. Additionally, the Bank of Canada has paused its interest rate hikes for the time being, which should lead to lower mortgage rates. Generally, those two factors drive enough demand to prevent a severe drop in home prices.
What does that mean for you? It depends on where you live, and whether you’re looking to buy or sell. In some regions, prices are dropping even faster, while in others, prices are holding steady (or even continuing to climb).
The answer to that question is complex and depends largely on your personal situation.
Overall, buyers should take advantage of dropping prices. If your finances are in order and you’re ready to buy your dream home, low inventory shouldn’t stand in your way—and if you have the right real estate agent, it won’t. Just remember, if you want to buy now, you’ll need to come in with a strong offer and be ready to negotiate.
Selling a home? Let’s do it. As new homes are listed this spring, buyers who have been sitting on the sidelines will jump in, and it will be easier for your real estate agent to find the perfect match for your property. Just remember, while most regions of the country still favour sellers and most sellers have seen their home values skyrocket, your expectation for your sale price should look a little different this year than it might have in 2021 or 2022. What’s the perfect price to attract buyers? Let’s talk about it.