Home sales dropped 5.6% month-over-month (m/m) in October–the fourth consecutive monthly decline and the sharpest slowdown since June 2022. Sales fell in 9 of the ten provinces, notably in P.E.I. (-15.3%), Alberta (-8.3%), B.C. (-6.9%), Ontario (-5.5%), and Quebec (-5.1%), while rising 2.2% in New Brunswick.

The actual (not seasonally adjusted) number of transactions in October 2023 was 0.9% above October 2022.

However, we have high hopes for the spring season as long as the Bank of Canada continues its rate pause. Record population growth has increased pent-up demand for housing and fixed mortgage rates have been falling owing to the US-led rally in bond markets.

Sellers move to the sidelines as well. Following the September surge in new listings, newly listed homes fell 2.3% m/m in October, the first decline since March.

With sales falling by more than new listings in October, the national sales-to-new listings ratio eased to 49.5% — a 10-year low. The highest level for this measure was 67.9%, recorded in April. The long-term average for this measure is 55.1%.

There were 4.1 months of inventory on a national basis at the end of October 2023, up a full month from its low of 3.1 months in May. That said, it remains below its long-term average of nearly five months of inventory.

The Aggregate Composite MLS® Home Price Index (HPI) declined by 0.8% m/m in October 2023. While price declines are still mainly an Ontario phenomenon, home prices are now starting to soften in parts of British Columbia. The Aggregate Composite MLS® HPI was up 1.1% on a year-over-year basis.

The Bank of Canada policymakers are set to meet on December 6th. There is another inflation report next Tuesday, November 21, the third quarter GDP is released on November 30 and the jobs report on December 1. We expect these data will support the Bank’s rate pause. In the meantime, the rally in 5-year Government of Canada bond yields has lowered fixed-rate mortgage yields.

US inflation, reported this week for October, came in weaker than expected, lowering longer-term yields even further. While I do not expect the Bank of Canada to cut interest rates until the middle of next year, the marked rally in market-driven rates is a welcome development for potential buyers.