Canadian Homebuyer Sentiments in 2023

Are homebuyers feeling renewed confidence in the Canadian real estate market?

In February, national home sales rose 2.3 percent month-over-month, although they had dropped 40 percent from the same time a year ago, according to the Canadian Real Estate Association (CREA). Considering that interest rates might have peaked, and the national average sale price was down nearly 19 percent year-over-year, households might be showing interest again in Canada’s housing market.

Market experts say that if the Canadian real estate sector is on an upward trajectory after roughly a year of a sharp correction, it might only be confirmed during the historically busy spring homebuying season.

Until then, a new report sheds light on the sentiment of today’s prospective homeowners. So, what do the numbers tell us exactly? Perhaps cautious optimism might be the best description for the typical buyer.

Homebuyer Sentiments in 2023

It is challenging navigating this current economic climate, from rising borrowing costs to elevated inflation to an uncertain economic future. But how rough is it for families trying to purchase a residential property?

According to the RE/MAX 2023 Real Estate Industry Trends Report, homebuyers are optimistic that the Canadian real estate market is moderating and regaining balance this year. The study revealed that not only are households optimistic about a moderating market, but about one-fifth maintain a level of optimism surrounding new missing middle housing, eco-friendly housing options, and livability in rural areas.

Fewer Canadians are positive about car-free infrastructure or updated road infrastructure.

Despite the considerable optimism about the broader housing market, homebuyers also maintain plenty of concerns. For example, more than a third (34 percent) of Canadians are concerned about the rising cost of living and inflation. This was followed by 25 percent of Canadians worried about the scarcity of affordable housing in their community. One-quarter of Canadians were also fearful about the rising cost of rent and its impact on their ability to save for and purchase a home.

For many of these aspects, Christopher Alexander, the president of Re/Max Canada, contends that the housing crisis must be “tackled in a coordinated, strategic effort by all levels of government.”

“I encourage visionary thinking and solutions that may include reforming municipal zoning laws to allow for a greater diversity of housing; expanding capacity for laneway developments; and using available land to drive housing supply in a manner that doesn’t compromise climate adaption and mitigation efforts. For that to happen, tough decisions must be made,” he said in the report.

Canadians ostensibly agree, with 66 percent of respondents saying that addressing affordability and the supply crisis should be a top priority for governments nationwide.

A proposed solution is removing zoning and development red tape as a critical measure in bolstering housing stocks across the country.

The next component of the report assessed what factors Canadians will include in their homebuying search. Surprisingly, pricing did not crack the top three.

So, what did? Here is a breakdown:

• Protecting the environment: 66 percent
• Use of technology in transactions: 47 percent
• Investments in public transit: 38 percent

Is This 2019 All Over Again?

Many features of the 2023 Canadian real estate market are comparable to the environment in 2019, notes Shaun Cathcart, CREA’s Senior Economist.

“The similarities between 2023 and the recovery year of 2019 continued to emerge in February, with sales up, the market tightening, and month-over-month price declines getting smaller,” said Cathcart. “But the biggest similarity was a sharp drop in seasonally adjusted new listings. Future sellers, many of whom will also be buyers, are likely biding their time until the optimum time to list and buy something else. For most, that’s in the spring. Will buyers jump off the fence to snap homes up in 2023 once they finally start to hit the market? They did in 2019.”

Ultimately, affordability is improving coast to coast, although the pace may vary in certain pockets of the country. That said, acquiring a residential property today is more affordable than during the coronavirus pandemic.

Association data confirm that the national average home price was $662,437 in February. However, when the Greater Toronto Area and the Greater Vancouver Area are removed from the equation, the national average home price is really about $530,000.

As long as new listings for homes edge higher and new housing construction activity remains robust, the price of a detached house in Nova Scotia or a townhome in British Columbia will ease. If mortgage rates do not go any higher, this might be the goldilocks zone in today’s housing market.