Spring Awakening Signs of Renewal in Canada Housing Market
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Spring arrived early in Canada's housing market as evidenced by a second consecutive month of increased home sales in January, marking a 3.7% uptick following a four-month decline. This resurgence brings sales figures back to their summer levels. Analysts, such as economist Robert Hogue from the Royal Bank of Canada, interpret this upturn as a sign that the sharp decline induced by soaring interest rates may have come to an end. Despite this, prices continue to decrease, with the MLS Home Price Index dropping 1.2% nationally in January and 5% since August 2023. Price decreases were observed in various local markets including Vancouver, Winnipeg, Toronto, Hamilton, Ottawa, Montreal, Moncton, and Halifax. However, there's a belief among experts like Hogue that the market could be reaching an inflection point as buyers contend with a diminishing inventory of available homes for sale.
Although there's optimism about a potential stabilization in prices, challenges in affordability persist. Despite anticipated aggressive interest rate cuts over the next year, affordability is expected to remain strained, presenting a challenge not seen since the 1990s, according to Olivia Cross, a North America economist with Capital Economics. The firm predicts that while home price declines may moderate, prices are likely to remain largely stagnant throughout the year. The growth in new listings slowed down, and the sales-to-new-listings ratio indicates a potential annual increase in prices, further supporting the notion that the market might be nearing a bottom.
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