Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Housing activity declined in December. Nevertheless, the level of activity remains higher than where it ended 2023. Moreover, we are seeing some improvement in house prices in recent months.
The housing market has improved since the summer, likely due to the lower interest rates. There is likely a sizeable amount of pent-up demand waiting for lower interest rates to jump back into the housing market, expectations that further rate cuts in 2025 may be delaying some of the impact of lower rates on housing activity. It will be interesting to observe how stimulative the 100bp rate cuts by the Bank of Canada in 2024Q4 will be on activity in the housing market this spring.
Housing affordability remains a major issue for the Canadian economy, and, as we have shown recently (see), restoring housing affordability in most Canadian cities will require some sizeable adjustments in terms of prices and/or income and sacrifices. It will come at a cost for the whole economy.
In Alberta, housing market activity remained robust by historical standards. We note the Edmonton has been outperforming Calgary in recent months, and both cities remains amongst the strongest housing markets in Canada. Strong migration into Alberta and affordability are significant supports for housing activity and prices compared to elsewhere in the country.
Activity in the Canadian housing market dropped by 5.8% m-o-m seasonally-adjusted in December. Despite this decline, the number of transactions, at 43.2k, is 12.0% higher than for the same month in the preceding years. The decline in activity in December was mainly the result of weaker activity in Ontario (-11.9% m-o-m), Saskatchewan (-10.1% m-o-m), Alberta (-7.1% m-o-m) and BC (0-3.4% m-o-m). On the flip side, activity increased in New Brunswick (+4.9% m-o-m), Quebec (+3.0% m-o-m), and Manitoba (+1.4% m-o-m).
Compared to the average level of 2019, the number of transactions is about 2.6% higher nationally but continues to be well above its pre-pandemic level in Alberta (+54%), Newfoundland (+42%), and Saskatchewan (+42). On the flip side, activity is well below pre-pandemic in Ontario (-18%).
New listings decreased 1.7% m-o-m seasonally-adjusted in December and were 9.9% higher compared to the prior year. The decline in new listings was seen in every province, except for New Brunswick (+5.5% m-o-m) and Quebec (+0.4% m-o-m). The biggest drop in new listings was in PEI (-7.0% m-o-m), Saskatchewan (-6.1% m-o-m), Newfoundland (-4.9% m-o-m), and Nova Scotia (-4.1% m-o-m).
Despite sales activity being weaker than new listings in many regions, the month-of-supply measure rose to 3.9 nationally, well below where it was at the start of the pandemic. Based on this measure, the change inventories at the provincial level were mixed. Inventories rose the most in Ontario, PEI, BC, and Saskatchewan, while they declined in New Brunswick, Newfoundland, Quebec and Manitoba.
Inventories are the lowest in Manitoba (2.1 months), Alberta (2.3 months), New Brunswick (3.2 months), and Saskatchewan (3.4 months) and the highest in PEI (6.1 months), BC (5.5 months), Ontario (4.0 months), and Quebec (3.9 months).
With a month-of-supply at 2.3, Alberta’s housing market remains close to its tightest since 2007 if we exclude the pandemic.
Despite the lower sales and higher inventories, the MLS House Price Index increased 0.3% m-o-m in December. Compared to the previous year, house prices nationally were marginally lower by 0.1% y-o-y.
The biggest monthly price increases were in Moncton (+1.8% m-o-m), Ottawa (+1.7% m-o-m), Okanagan (+1.4% m-o-m), Vancouver Island (+0.6% m-o-m), BC lower mainland (+0.6% m-o-m), and Regina (+0.6% m-o-m). Prices decreased the most in Hamilton-Burlington (-1.4% m-o-m), Barrie (-0.8% m-o-m), and Oakville-Milton (-0.1% m-o-m).
On a y-o-y basis, most regions have seen higher prices, except for Hamilton-Burlington. Prices increased the most in Winnipeg (+8.4% y-o-y), Edmonton (+7.8% y-o-y), Moncton (+7.5% y-o-y), Saskatoon (+7.3% y-o-y), and Montreal (+7.2% y-o-y).
Compared to their recent peaks in early 2022, prices have declined by 13.3% nationally. However, prices are still about 35% higher than in January 2020 on the eve of the pandemic. Compared to their recent peak, prices dropped the most in Oakville-Milton (-21%), Hamilton-Burlington (-20%), Guelph (-19%), Niagara (-19%), and Barrie (-18%). In contrast, prices have continued to increase in Moncton (+19%), Calgary (+17%), and Saskatoon (+12%).
In Alberta, benchmark prices rose 0.3% m-o-m and are up 4.4% y-o-y in Calgary, while they rose 0.5% m-o-m in Edmonton and 7.8% y-o-y. Edmonton has been outperforming relative to Calgary since the summer. Strong population growth and better affordability could explain the better performance in Edmonton.
In Alberta, the housing market remains robust, with transactions still well above their pre-pandemic level.Nevertheless, the number of transactions has decreased in December in most regions compared to the same month last year, except in Edmonton (+10.1% y-o-y) and South Central Alberta (7.1% y-o-y). (see table below for details). On a 3-month moving average of the year-on-year, transactions increased 8.1% in the province, with strong increases in Edmonton (+20.9%), Fort McMurray (+20.2%), Lethbridge (+12.9%), and Lloydminster. On the flip side, Calgary was the only region seeing lower activity (-0.8%)
Compared to the average level of transactions in 2019, activity in the province increased by 54%, led by Edmonton (70%), Central Alberta (+58%), Calgary (+53%), and South Central Alberta (+40%).
New listings were slightly higher than last year at the provincial level (1.2%). However, there are some significant differences regionally. On a 3-month moving average of the year-on-year, new listings increased the most in Calgary (+5.9%), South Central Alberta (+5.4%), Lethbridge (+2.0%), and Fort McMurray (+1.2%). New listings declined the most over the same period in Lloydminster (-11.0%), Alberta West (-10.6%), Central Alberta (-8.5%), and Medicine Hat (-3.9%).
With sales stronger than new listings in March, many regions have seen a slight tightening of their housing markets. The primary seller’s markets are Medicine Hat, Lethbridge, Central Alberta, and Grande Prairie. The main buyer’s markets is only Fort McMurray.
Average house prices in the province increased by 10.4% on a 3-month moving average of the year-on-year in the province. Prices are higher in all regions, except in Western Alberta (-11.3%). Prices rose the most in Lloydminster (+14.8%), Grande Prairie (+14.7%), Edmonton (12.9%), Fort McMurray (12.8%), and Calgary (+12.7%). They increase the least in Medicine Hat (0.7%), Central Alberta (+6.0%), and South Central Alberta (+8.8%).
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Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication