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Market softness is widespread<\/h2>\n
The temperature is dipping in other parts of Canada too, albeit to a lesser degree. Even super-hot Alberta is showing early signs of softening with resales falling 8.3% m\/m in October. For now, prices continue to rise in the majority of provinces (including Alberta, Saskatchewan, Quebec and most Atlantic provinces), though British Columbia recorded its first decline (-0.1% m\/m) in seven months. <\/p>\n
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Spring rebound has largely reversed in Canada<\/h2>\n
Nationwide, resales have dropped nearly 12% over the past four months (including a 5.0% m\/m decline in October), reversing three-quarters of the spring rebound. This, along with a growing number of homes put up for sale since spring, has entirely unwound the tightness in demand-supply conditions that prevailed earlier this year. And buyers are taking advantage of their stronger bargaining position. They\u2019ve successfully extracted price concessions from sellers in the past two months. The national aggregate MLS HPI fell 0.4 % m\/m in September and a larger 0.8% in October. We expect this downtrend to continue in the coming months.<\/p>\n
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Supply-side watch: still few signs of trouble<\/h2>\n
While new listings have trended higher since spring, their levels generally remain well within pre-pandemic range. And there\u2019s been little evidence that the rise is accelerating. In fact, new listings actually fell in Canada (-2.3% m\/m) and most major markets in October. With interest payments soaring for Canadians with variable-rate mortgages and renewing fixed-rate mortgages, the financial squeeze could prompt a growing number of existing owners to sell their property. This would pose a risk to the market if a wave of sellers ensued.<\/p>\n
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Market likely stay quiet into next year<\/h2>\n
Transaction activity has been very quiet this fall across most of Canada. High interest rates, major affordability challenges and mounting economic uncertainty have kept homebuyer demand muted, especially in high-priced markets in Ontario and BC. We see this trend continuing into next year. With the prospect of higher interest costs bringing more sellers to market, buyers could gain even more pricing power in the months ahead. This would set the stage for further price erosion in Ontario and BC. The weakness could potentially spread to other regions as well. Any meaningful turnaround in the market will have to wait until interest rates are reduced. RBC expects the first cut in the Bank of Canada\u2019s policy rate will be around mid-2024 though sees longer-term bond yields drifting lower ahead of that point.<\/p>\n
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