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Economic News

Canada: An Unlucky Friday the 13th for Increasingly Stretched Homeowners

October 13, 2023
Marc Desormeaux
Principal Economist


  • Canadian existing home sales fell by 1.9% in September 2023. It was the third consecutive monthly decline. Table 1 summarizes key data points.
  • We’re still tracking annualized real GDP growth in the range of 0% to 0.5% in Q3 2023, which is well below the Bank of Canada’s latest projection of 1.5%.


Friday the 13th came some four months after the Bank of Canada resumed hiking interest rates, and it was an unlucky one indeed for the housing market. Canada’s given back almost 40% of the sales gains seen between January—when the central bank initially paused its tightening cycle—and June—when it restarted interest rate increases. And weakness continues to spread beyond Toronto and Vancouver, which have experienced the sharpest slowdowns since June. That suggests more and more markets are responding to the cumulative effects of higher borrowing costs.

As softness in home purchases has persisted, so too has the upswing properties for sale. It’s now been half a year of uninterrupted and broad-based increases in new listings, which have registered a 35% national climb since March—the strongest-ever recorded six-month advance outside of the COVID-19 pandemic. If sales weakness continues in the months ahead, we could reasonably expect to see listings fall back in response. But the trend in listings implies that many individuals who bought homes in a lower-rate environment are now struggling with sharply higher borrowing costs.

Still, not every region is feeling the same pinch. Attracted by the relatively affordable housing, people are flocking to Calgary as well as Edmonton, where sales remain high despite the dampening effects of higher rates. For the last several months, home purchases in Alberta’s largest city have been nearly twice as high as in the year before the pandemic, in stark contrast to most other large Canadian centres (graph 1). Calgary’s short-term demand-supply balances also suggest conditions firmly in favour of sellers—and future upward price pressures—while Toronto experienced a third straight month in buyers’ market territory (graph 2). Halifax and Vancouver are trending in the same direction as The Big Smoke. That’s something of a reversal of the pre-pandemic trend, where markets in Ontario and BC were the tightest and cities in oil-producing provinces were contending with huge supply gluts.

In all, despite pockets of strength, it’s clear that Canadian housing market sentiment has soured meaningfully since the spring. Going forward, we expect softening economic and employment growth This link will open in a new window. as well as sustained high interest rates to further weigh on housing demand. That said, the well-documented longer-term supply shortfall accrued over multiple decades still means that a return to affordability isn’t imminent. With downward pressure on prices and still-stretched housing affordability set to remain the trend at least in the near-term, homeowners and prospective buyers alike probably won’t be feeling lucky beyond this Friday the 13th, either.