The saying when it comes to the temperature across Canada is “if you don’t like the weather, just wait five minutes.” It’s an old cliché, but one that accurately represents some of our largest cities where things can move from pouring rain to bright sunshine almost in the blink of an eye.
It’s also true of the real estate market across the country, where it often feels like things can change just as quickly.
While the days are still warm and the sun is shining bright now, fall is right around the corner. For buyers and sellers waiting for the right time to make their next move, a new season can bring new market conditions and new opportunities. Yet in the world of real estate, it’s nearly impossible to predict anything with 100% accuracy.
We spoke with Ryan Biln, an economist with the Canadian Real Estate Association (CREA), to get his thoughts on what’s to come in the last quarter of 2023.
Interest rates keep surprising us
According to Biln, the market is stronger than what economists might have expected given the frequent hikes in interest rates since spring 2022. At the start of the year, the Bank of Canada had signaled a freeze in rate hikes, which led buyers to take advantage of potentially great deals. However, with two more hikes since that time, the market was cooler in the summer than it might have been otherwise.
However, Biln noted the cooler temperatures on the market may not be over just yet.
“With uncertainty about whether we’ll see another hike at the September [Bank of Canada] meeting, we may see this slowdown continuing into the second half of the year,” noted Biln.
Editor’s note: On September 6, the Bank of Canada announced it was maintaining its target for the overnight rate at 5%.
CREA has already adjusted its forecast for the rest of 2023 to account for what may ultimately be a cool down. The CREA Housing Market Report released on August 15, 2023, showed the Aggregate Composite MLS® Home Price Index (HPI) is just 1.5% below what it was a calendar year ago. This is the smallest decline the Canadian market has seen since October 2022, which could indicate year-over-year comparisons could return to positive territory as we close out 2023.
“That’s known as a base effect. So, year-over-year price growth will make it look like prices are heating up, even though I predict they’ll actually be flattening out,” Cathcart said in the report.
So who’s coming out ahead?
Who ultimately benefits in such a confused market — buyers or sellers? In short, both sides are working to navigate a complicated landscape.
However, Biln notes CREA’s economists have seen some degree of balance restored in the market. In March, for example, listings were at a 20-year low. This summer though, in line with that ‘wait five minutes’ analogy, the number of new listings has returned to normal for this time of year, and that could mean more selection for eager buyers ready to jump into
the market.
The number of newly listed homes was up 5.6% on a month-over-month basis in July, according to CREA, building on gains of 2.8% in April, 7.9% in May, and 5.9% in June.
Where’s the boom?
It’s predictable to talk about the real estate markets in Toronto and Vancouver as being unaffordable, with sky-high prices that well exceed the budgets of most hopeful residents. These frenzied clusters have kept expanding population circles further outside the urban centres, with new communities continuing to grow and expand as residents clamour for some level of even part-time access to the downtown core, especially with many hybrid workplaces here to stay.
Other cities, though, have also benefited from changes in the economy and growth in various sectors. Calgary, for example, has developed an exceptionally strong real estate market, which has bounced back from the oil price shock of 2014. The city offers new residents a burgeoning economy and a wide variety of attractions and entertainment at a significantly lower price point than the Greater Toronto Area — the cities had an average home price of $548,300 and $1,171,300 respectively as of August 2023.
The East Coast has also been in growth mode in recent years. East coast markets have been hit hard in recent years, both from the oil price shock and from depleted natural resources in previous decades, but the region is once again on the rise. The technology sector has been burgeoning in the Maritimes and Newfoundland and Labrador, and those employment opportunities bring young, hungry buyers ready to enter the housing market.
What’s next?
So what’s coming down the pipeline for fall of 2023? Just like watching the weather change, buyers and sellers may have to wait those few extra minutes. Economists across the country will be paying close attention to the next date announcing the overnight rate target which is scheduled for October 25, and forecasts will be written accordingly leading into 2024.
No matter what happens though, REALTORS® in every corner of the country, from coast to coast to coast, will be ready to help you make your next move.
— Realtor.ca