Canadian home sales are trending upward, but just not as fast as once forecasted, which could lead to a spillover effect in 2025.
The latest data from the Canadian Real Estate Association (CREA) shows buying and selling activity climbed 1.9% in September compared to August. That makes it three months in a row home sales have risen, albeit modestly.
However, CREA’s Senior Economist Shaun Cathcart pointed out we’re now three for three on residential sales rising following months with rate cuts.
“That, my friend, is a trend. Even though each individual increase wasn’t that big, when you have a trend like this in one direction, those gains add up,” Cathcart said during CREA’s Housing Market Report (watch the full video below).
Since May, Canadian home sales are now up 6% and have reached the highest levels since July 2023.
“That said,” Cathcart added, “they’re still well below where long-term trends suggest they should be, but we expect them to continue move higher as interest rates continue to come back down.”
CREA updates its housing activity forecast
It’s widely expected the Bank of Canada will continue to slash interest rates as inflation continues cooling down. The latest data from Statistics Canada, released October 15, shows inflation fell to 1.6% in September compared to a year ago, leading to a 0.5% cut to the Bank of Canada’s policy rate on October 23.
This brings the Bank of Canada’s policy rate down to 3.75%, which is much faster than previously anticipated by Canadian economists.
Neutral interest rates, according to historical data, hover around 3.5%—about 150 basis points lower than the highs of 5% experienced last year and early this year.
CREA’s previous forecast assumed a gradual return of buyers into the market starting with the first interest rate cuts this summer, but sales have only slightly budged.
“It’s possible that type of buyer who was, until recently, entering into the market… they might be deciding these days to hold off if they’re only going to have to wait six or seven months for low rates, as opposed to two-and-a-half years, which means we could get more activity next year,” Cathcart said in the report.
Because of this scenario, the remainder of the 2024 market is forecast to remain in more of a holding pattern until next spring, when a sharper rebound is expected. CREA states home sales in 2024 will come in 5.2% higher than 2023, reaching 468,909 transactions. In 2025, that number increases a further 6.6% to 499,816, with the biggest gains coming in Ontario (9.9%), British Columbia (8.5%) and Saskatchewan (6%).
Canadian home prices
The actual (not seasonally adjusted) national average home price was $669,630 in September 2024. The MLS® Home Price Index—an exclusive tool REALTORS® use to accurately gauge a neighbourhood’s home price levels and trends—was virtually unchanged at just a 0.1% increase in September compared to August.
In other words, another “flat as a pancake” month, according to Cathcart. And that’s historically rare.
And here’s some added context to note: that’s not the case in Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia as prices are rising in those provinces.
“But really, with data, it only takes a slight bit of softness in a province as big as Ontario, which we are seeing, to totally counterbalance those gains in the national numbers,” Cathcart said.
So, where will Canadian home price levels be by the end of this year and next? In its latest report, CREA forecasts a national average price edging up 0.9% compared to 2023, hitting $683,200 in 2024. In 2025, the average price is forecast to climb 4.4%, reaching $713,375.
“Whether you’re looking to buy or sell a property this fall or getting ready for what promises to be a big spring market next year, the first step is always to contact a REALTOR® in your area,” said James Mabey, CREA’s Chair and a REALTOR® in Alberta.
The article above is for information purposes and is not financial or legal advice or a substitute for financial or legal counsel.
