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Economic News

Canada: Homebuyers Entered the Market in Droves in October

November 15, 2024
Kari Norman
Economist

Highlights

  • Home sales in Canada picked up the pace last month, rising by 7.7% m/m in October, while the average sale price was up 2.2%. Table 1 below summarizes key data points.
  • Our Q3 2024 tracking for real annualized GDP growth of around 1.0% is below the Bank of Canada’s (BoC) 1.5% gain published in their recent Monetary Policy Report. Looking ahead, we continue to track real GDP growth in Q4 roughly in line with the BoC’s forecast of 2.0%.

Implications

Homebuyers came out in droves in October, with existing home sales rising by 7.7% m/m (seasonally adjusted). The fourth rate cut in a row, totalling 125 basis points (bps), seemed to be enough to motivate many buyers to make their move, after tepid increases in home sales in August (1.4%) and September (1.9%).

Listings declined last month by 3.5%, reversing the 4.8% increase in September. As a result, inventory dropped to 3.7 months, down from a peak of 4.3 months in May to a level not seen in over a year. Still, the buildup in inventory over the first half of the year means the pressures on prices from the increase in sales were muted. At the national level, average prices rose 2.2% in October from the month prior, and benchmark prices held steady. Despite this uptick in average prices, they both remain well below the peak of the market in early 2022.

As always, location is the defining feature of the housing market. Despite large monthly increases in sales of 19.6% in Vancouver and 14.0% in Toronto, average prices didn’t follow suit (-0.8% and 1.5% respectively). Even with the surge in sales, Canada’s two largest cities remain near buyer’s market territory (graph 1). Sales in Montreal and Quebec City rose more slowly in October than the month prior, but year-to-date remain about 15% higher than the same period a year ago. The number of active listings in Quebec City is reaching a historical low for this time of year, giving prospective buyers fewer choices.

Shelter remains the largest component driving inflation. The BoC will be watching closely to see whether the four recent interest rate cuts result in significant increases in home selling prices, but so far prices are well-behaved. Our forecast is for the advance in existing home sales and prices to remain modest despite falling interest rates due to slower population growth (see our latest Housing Market Outlook External link.). We remain confident that the BoC will reduce its policy rate again in December by 25bps, followed by five more in 2025.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.