- Kari Norman
Economist
Economic News
Canada: Homebuyers Felt Little Holiday Cheer in December
January 15, 2025
Highlights
- Home sales in Canada experienced the largest monthly drop in over a year, at -5.8% m/m (seasonally adjusted) in December, while the average sale price fell 2.2%. Table 1 below summarizes key data points.
- Despite a poor ending, 2024 was a turnaround year for the housing market, with total home sales up 7.3% after falling more than 11% in 2023, and average prices up 2.9%.
- Our Q4 2024 tracking for real annualized GDP growth is around 2.5%, above the Bank of Canada’s (BoC) October Monetary Policy Report.
Implications
Home sales fell in December by 5.8% m/m (seasonally adjusted), despite a 50-basis-point (bps) rate cut by the BoC and new federal government policies supporting homebuyers. December’s second consecutive jumbo rate cut brought variable mortgage rates down a total of 175 bps over the course of 2024. In addition, new mortgage rules took effect December 15. But as we recently reported External link., the new federal mortgage policies will have a mixed effect on homebuyer affordability.
Listings fell last month by 1.7%, but not enough to offset the pullback in sales. As a result, the inventory of homes for sale increased for the first time since May to 3.9 months, but remain below the peak of 4.3 months. Overall, inventories ended the year about where they started (graph 1).
The decrease in sales paired with rising inventories relieved pressure on prices. At the national level, average prices fell 2.2% in December from the month prior, and benchmark prices held steady. This unwinds price increases over the previous two months and puts the average price on par with March 2021.
As always, location is the defining feature of the housing market. Toronto, Vancouver, Calgary and Edmonton all saw fewer in sales in December than the previous month, with Toronto and Calgary closing out the year lower than December 2023 (graph 2). Prices in Toronto were also lower at the end of 2024 than a year ago. As a result, Toronto is solidly in buyer’s market territory. Despite a more muted December, Montreal and Quebec City had strong housing markets in 2024, with sales up around 20%, each, and prices rising 7.4% in Montreal and just under 10% in Quebec City.
Shelter remains the largest component driving inflation. The BoC will be watching closely to see whether interest rate cuts at the final five rate decisions of 2024 result in significant increases in home selling prices, and so far they have little to worry about. We maintain our view that the BoC will reduce its policy rate again this month by 25 bps. This should be followed by a pause in March and then a continued pace of gradual rate cuts through the rest of 2025.