Canadian Housing Update 6: October 30th, 2023

Once again, supply grew again as the GTA and VTA saw the highest number of listings since 2013! Prices continued their weakening trend as that supply turns this into a buyer’s market with no end in sight. Even though listings have increased, actual sold properties continue to decrease, and the spread grows larger every month.

Key Stats for October

Median GTA prices are down about 0.5%
‍Median VTA prices are down about 2.0%
‍Active Listings increased for 11 consecutive months
Homes Sold decreased for 5 consecutive months
Suburban Area prices were generally flat in aggregate for October.

Topics

Listings vs. Buying Spread

Interest Rate Pause and the Effects on Mortgage Rates

Affordability

Listings vs. Buying Spread 

Last month the spread appeared as if it would be slightly tightening but October came in with listing increasing dramatically and sales remaining low:

This is not a good sign for prices as this spread grows. Without a flatting or decrease of supply, it is hard to see prices rising in this environment. This could be exasperated if sellers are put in a position where they are forced to sell vs. wanting to sell. Just remember 100,000 mortgages get renewed in Canada every month and that means an average in increase in mortgage payment of about 40%. There are better environments to be forced to make a choice.

Interest Rates and the Effects on Mortgage Rates

The Canadian Central Bank rightfully so, decided to pause on interest rates given the consistent decrease in inflation and the struggling Canadian economy. We continue to drop in GDP per population and this has been consistent for over a year. This means even though the population grows our GDP is increasing at a lower rate. This weakness has given the central bank reason to pause and with the weak economy, mortgage rates have been cracking. The forecast from the major banks is that 5-year mortgage rates will start to decrease in Q1 of 2024 and continue to decline into the future.

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The factors that could speed this up would be a weaker real estate market, which is a possibility. 

Affordability

The main metric we always watch is the trend in affordability. We are still astronomically high unaffordability vs. the historical average, and this is predicted to continue to decrease which is positive for Canadians as we need toget more affordable. This affordability will come from a combination of a decrease in rates and a decrease in prices.

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While we could see a price recovery, the long-term trend is to see a decrease in this metric. Getting back to the 40% number is most likely not going to happen but going down from here is not only likely but necessary.

Summary

Supply increases, rates leveling off, and affordability trending down. Housing will become affordable again, but it will take time, this will come from a combination of lower prices and lower rates. The winter is normally when volume dies off and pricing can become even more volatile.

Justin, Konrad, and Merriel

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