Canadian real estate had all of the hallmarks of a great comeback story. Interest rates are falling. House prices are down from the peak. Affordability is returning to the market. The government was throwing policy at the housing problem, despite warnings from the Bank of Canada. It sounds like the setup for a great recovery.
The only question is… when do we get there?
Or, more aptly, “Are we there yet?”.
Instead of a familiar and predictable road, we’ve been left on a long and drawn out road trip. Countless familiar signs have passed us by, yielding no result. We’ve been stuck in a state of wondering, if, not when, in fact, we’d see any signs of recovery appear.
For years we’ve heard reports from the industry of “buyers on the sideline” waiting for some factor to change in the real estate market equation. It would appear that the factor is whether or not prices are going up or down.
“Buy the dip”
Is it possible you might see a rush of buyers trying their hand at the seemingly impossible task of buying the bottom of the market? The age-old advice about “time in the market, not timing the market” seems to be ringing in my ear. At a minimum, the idea might be “buying the expletive dip”, as popularized by Wall Street Bets. Since we don’t have an online community of options-trading degeneracy in Canada, we focussed our speculative fever on the housing market, until we couldn’t any longer.
And so, it appears when people said they’re waiting to see the “dip” or the “bottom” of the real estate market, they might have been looking in the rear-view mirror. This isn’t to say that the bottom is “in” per se. There just seem to be a lot more buyers after three months of consecutive growth in price and volume than there were during three months of declining price and volume.
This is the ironic part about the whole “market timing” thing. If you want to bottom-tick the market, you have to be buying on the way down. If you’re the buyer submitting below-market offers and pulling sales prices down, you create the dip— you don’t buy the dip.
You create the market, you don’t time the market.
By the numbers: Recovery, or relief rally?
Until last month, data hadn’t really indicated even the slightest chance at recovery. September appeared out of character, with the typical back-to-school rush surprisingly muted against the backdrop of the US election, breaking “fall market” seasonal norms to the downside. Staying true to this new and contrarian character, Canadian real estate now seems to be breaking seasonal norms to the upside, heading into November, a month when the market is typically slowing down toward the holiday season.
Should we see sustained upward pressure on the market heading into December, it would be reasonable to imagine that the market is seeing a resurrection of volume from lower rates, increased buying power, and optimism around new mortgage policy.
Increased buyer activity pushes sales higher
Source: CREA, Valery.ca
According to CREA, national home sales climbed 2.8 per cent in November compared to October, marking the second consecutive month of gains and a cumulative 18.4 per cent rise since May. This jump comes after months of subdued activity earlier in 2024, which was largely blamed on lingering “higher for longer” interest rates.
With the Bank of Canada now slashing rates at a recession-ready pace, sidelined buyers have apparently been pulled back into the market, and the numbers show they’ve arrived in droves.
Not surprisingly, activity was strongest in Canada’s usual real estate powerhouses—Greater Toronto, Metro Vancouver, Calgary’ and Montreal. Smaller cities in Alberta and Ontario also reported double-digit increases in sales, indicating a broad-based uptick. Ontario seems to be back to its former glory of taking nearly half of the monthly dollar volume of sales. However, this surge in activity raises a critical question about whether it represents a genuine recovery or just another temporary spike driven by policy tweaks that artificially boost demand in an attempt to soften the blow of recession and unemployment in 2025.
Realistically, this market looks a lot more like a typical year (see 2016 to 2019 above) but it feels high relative to last year’s lows, and low relative to the pandemic’s highs.
Source: CREA, Claude, Valery.ca
Sellers hold the upper hand
For those looking to sell, the market continues to tilt firmly in their favour. The sales-to-new-listings ratio (SNLR), which measures market balance, rose to 59.2 per cent in November. That’s a significant jump from the 52 per cent to 53 per cent range seen earlier in the year, signalling a tightening market. With fewer new listings coming to market (down 0.8 per cent month-over-month), buyers are left to compete for an ever-shrinking pool of homes.
This imbalance is further reflected in the months of inventory metric, which…
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