February may have been a “relatively uneventful” period in Canada’s housing market, but the national real estate association thinks the slow month could be the calm before a spring storm.
The Canadian Real Estate Association (CREA) said Monday that home sales were down 3.1 per cent in February from January, giving back some of the gains seen over the previous two months.
CREA’s home price index was flat in February, snapping a streak of five consecutive months of declines.
The national average home price last month was $685,809, up 3.5 per cent year over year.
The number of newly listed properties rose 1.6 per cent ahead of the typically busy spring market.
The ratio of sales to new listings eased to 55.6 per cent last month, which CREA said floats just above the long-term average indicated relative balance between buyers and sellers in the market.
CREA chair Larry Cerqua said in a statement Monday that how busy the season ends up being depends on whether sidelined buyers are waiting for hints of interest rate cuts from the Bank of Canada, or just for listings to pick up in the spring.
“After two years of mostly quiet resale housing activity there’s a feeling that things are about to pick up,” Cerqua said.
Policymakers at the Bank of Canada have been mum on the timeline for interest rate cuts, which affect the cost of borrowing and the size of mortgages Canadians can afford. But economists expect easing to the policy rate at some point this year, with cuts potentially beginning in the late spring or early summer.
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CREA senior economist Shaun Cathcart also said in a statement that February might end up being the last “relatively uneventful” month in the 2024 housing market.
“With so much demand having piled up on the sidelines, the story will likely be less about the exact timing of interest rate cuts and more about how many homes come up for sale this year,” he said.
TD Bank economist Rishi Sondhi said in a note to clients Monday morning that February home sales were likely weighed down by a creeping up in the bonds market since the start of 2024. Rising bond yields, which inform fixed mortgage rates, are tied to expectations that the Bank of Canada will keep its policy rate higher for longer.
Overall sales activity is up nearly 20 per cent from February last year – when the housing correction tied to the central bank’s rate hike cycle put a chill in the market – but remains roughly five per cent below the 10-year average, CREA said.
Sondhi said that despite the “volatile” past few months of sales figures, the housing market is still tracking for solid gains in the first quarter of the year. “Subdued” sales level in Ontario, British Columbia and Quebec are keeping national figures down, he said, adding that there’s likely “significant pent-up demand” in these markets.
A Royal LePage report released last month shows that more than half (56 per cent) of would-be homebuyers who responded to a Leger poll indicated they’ve had to postpone their property search amid the central bank’s rapid tightening cycle.
BMO chief economist Doug Porter said in a note that despite the pullback in sales last month, February’s reprieve from price drops suggests that “the housing market is finding a bottom” after two years of cooling.
He added that rapid population growth over that time will help to fuel demand when the Bank of Canada starts lowering its policy rate, making it easier for sidelined buyers to get into the market.
“When rates do eventually start to come down, we expect activity to pick up in a hurry,” he said.
The Royal LePage report suggested that a drop of even a quarter of a percentage point in the Bank of Canada’s policy rate would get 10 per cent of prospective buyers to resume their search.
Nearly one in five (18 per cent) of respondents said they’re waiting for cuts of between 50 and 100 basis points, while 23 per cent said they need to see a steeper drop than that before getting back into the market.
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