CREA released their December statistics along with their hallmark annual optimism heading into January. The big question on everyone’s mind is whether or not that optimism is warranted moving into 2025’s real estate market.
CREA also seems to feel that we can see a resurrection of volume (the number of homes sold in 2025) without prices rising to the point of unaffordability.
I think they might be right. At this point, people are buying homes again because they can afford to. As long as that doesn’t change, 2025 should be a good year for Realtors, even if it’s not a good year for the homeowners hoping their house prices go up.
We should certainly hope to see some life in the resale market, given that new condo sales in 2024 were the lowest they’ve been since 1996, according to a recent report from Urbanation.
Source: Urbanation
Should this housing correction continue along its path, it looks like we’re in about the third or fourth inning here, and it’ll be a while until we see house prices trend upwards again in a meaningful way. BMO recently visualized this in the excellent chart below.
As we close the books on 2024, it’s worth reflecting on the Canadian housing market’s performance, particularly during its quieter December period. After a remarkable fall rebound, the market saw sales activity dip 5.8 per cent in December compared to November.
At first glance, this might seem like a retreat, but dig deeper, and the picture tells a different story—a market poised for a potentially significant shift this coming spring.
Much like a second-period intermission, December’s slowdown feels more like a pause than an end. Despite the dip, sales were still 13 per cent above where they stood in May 2024, just before the Bank of Canada made its first interest rate cut in June.
In fact, the fourth quarter was among the strongest in the past 20 years (excluding the pandemic), showing the resilience of the Canadian housing market even amid affordability challenges and economic uncertainty.
A supply story, not a demand story
The narrative driving December’s cooling wasn’t a lack of buyers—it was a scarcity of homes for sale. Nationally, new listings fell 1.7 per cent month-over-month, marking the third consecutive decline after a September surge.
The result? A market where potential buyers found themselves facing limited options, even as affordability began to improve. Faced with this challenge, many buyers may have pushed their purchase to Spring 2025, which fuelled CREA’s belief in a “pent-up demand” scenario in the year’s first quarter.
The bigger question on my mind is whether or not we could see a “pent-up supply” scenario as well, given the market is facing a few key factors:
- The impact of a trade war (Bank of Canada is predicting as much as a -6 per cent impact)
- Rising unemployment (albeit surprisingly strong in December)
- A change in government that promises less government jobs and spending
- Increasing purpose-built rental supply competing with investors
- Historically high jump in supply from completions in 2024 and 2025
- A record number of mortgages renewing at higher interest rates
- To me, the pent-up supply argument could be stronger than the one for pent-up demand.
Absorption is normal, not “strong”
The national sales-to-new listings ratio, a key indicator of market balance, eased back to 56.9 per cent in December from a 17-month high of 59.3 per cent in November. For context, this figure hovers near the long-term average of 55 per cent, reinforcing the idea that we’re still in a relatively balanced market. Yet, with inventory levels well below historical norms—128,000 properties listed nationally, compared to a long-term average of 150,000—buyers remain at a slight disadvantage.
Affordability: A fragile silver lining
One of the more optimistic takeaways from CREA’s December data is the indication of modest improvements in housing affordability. Mortgage payments as a percentage of income (MPPI) have begun to decline, supported in part by the Bank of Canada’s interest rate cuts earlier in the year. This relief has allowed more buyers to consider entering the market, particularly in regions where prices have stabilized.
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