Canadian Housing Market, March Recap: Data Reports Reveal Uncertain Future for National Market

In contrast to CREA’s outlook, market sources are predictably enthusiastic about an April 12th, 2024, Royal LePage report, which predicts Canadian home prices could rise by as much as 10% this year.

Given the widespread attention to the Royal LePage report, it is important to delve into its data to understand its inflationary implications for the spring homebuying market, especially as Statistics Canada has released its March 2024 Consumer Price Index data on April 16th.

According to the April 12th CREA report, the benchmark price fell by 3% to $718,400 in March, down $2,000 from February’s $720,500. Although still higher by about $8,000 compared to the same period last year, when it stood at $710,400, this contradicts Royal LePage’s forecast of a 4.5% year-over-year (YOY) increase in Q4 2023. Some of the decrease in the current benchmark price could be due to a lack of demand, with sales up by only 0.51% since February.

In the latest CREA video on the report’s landing page, CREA economist Shaun Cathcart provided a succinct summary of the month: “Sales in March were flat, up half a percent, new listings were down 1.6%, and prices dipped 0.3%.” He went on to say, “But it is what you might call a ‘shoulder month.’ It looks like not that much is happening, but we are really starting to turn a corner.”

Cathcart doesn’t elaborate on his “shoulder” theory, but it likely refers to the head and shoulders pattern often used in technical analysis. While he may suggest that the Canadian housing market is currently in a trough period poised for an upward bullish trend, his analysis lacks concrete indicators as to why this shift might occur. In the video, Cathcart simply transitions to discussing what happens once this turning point is reached.

“It’s looking like the market is really gearing up. We saw a burst of new listings in mid-March followed by a surge in sales in the last week of the month . . . More recently, we saw a huge jump in new supply in the first week of April,” Cathcart stated.

Positive signs include the lowest March sales-to-new-listings ratio since 2019, giving buyers more leverage this March than in the last five years. Demand is marginally higher than one year ago but remains relatively steady compared to pre-pandemic levels. 

Troubling signs emerged in April as bond yields began to rise (refer to the “1M” chart dropdown), according to MarketWatch data from April 16th, 2024, sending mortgage rates upward despite the Bank of Canada (BOC) saying that it planned to cut rates. Adding to concerns, on April 5th, The Canadian Press reported that Canada is facing rising unemployment and a worsening economy. However, Cathcart doesn’t address these issues, focusing instead on the impending return of buyers to the market.

Royal LePage’s report indicates a YOY increase in the aggregate home price in Canada by 4.3% to $812,000. Yet, according to CREA’s data, the first quarter benchmark price for 2024 was $719,000, up from the previous year at $712,367, reflecting a 1.03% difference.

The inconsistencies in benchmark pricing may stem from the methodology outlined in the footnotes of the Royal LePage report, which states, “Aggregate prices are calculated using a weighted average of the median values of all housing types collected.” Regardless, Royal LePage’s focus on median prices diverges from the norm of using benchmark prices for national sales data analysis. 

When housing indexes misjudge the direction of price movements, it poses a real problem for buyers who simply want to know where prices are headed. In the Royal LePage report, CEO Phil Soper asserted, “It is clear we are rapidly transitioning away from a buyer’s market and back to an environment where the seller has the upper hand.”

However, CREA data contradicts this assertion, showing the sales-to-new-listing ratio at its lowest point in March since 2019. In fact, Soper remains optimistic about upcoming mortgage renewals, stating, “We do not see this as a material drag on the housing market.” He went on to say that, despite high mortgage rates in recent years, “Canadians continue to meet obligations to their lenders, with the national mortgage default rate remaining at near historic lows.” 

While the Royal LePage report emphasizes the impact of supply shortages on pricing, it fails to acknowledge the rising trend in mortgage delinquencies. Also, it downplays the role of interest rates as a driver of prices, asserting that the primary factor will be a lack of supply. Despite analyzing data from recent years, it remains unclear how affordability affects home prices compared to housing supply. For instance, if there is only one house listed for a million dollars, but 500 buyers can afford it only at a fraction of that price, the house will not sell for the listed amount.

While CREA noted the lack of significant trends in March real estate data, it still forecasted price increases. Royal LePage’s data contradicts local board reports. Both entities are making predictions based on undetermined factors, which will take months to unfold. Consequently, homebuyers are left with multiple uncertainties when considering their largest life-purchase.

With all of that said, home prices may still rise, especially if the BOC follows through with a rate cut in June, although it’s not guaranteed, as reported by the Financial Post on April 11th. April’s data will provide valuable insights into the factors influencing leading indicators, such as the potential impact of BOC rate cuts on Canada’s economy and housing market.