Lower interest rates drive listings.

The Canadian Real Estate Association (CREA) says, according to a November 15, 2024, CBC News article, "Canadian home sales rose 30% in October from a year ago," that "the number of homes selling in October increased 30 per cent compared with a year ago, marking a shift from the market's holding pattern."

This "holding pattern" corresponds to a nine-month plateau in BOC's overnight rate at 5% from August 1, 2023, to May 1, 2024, as illustrated by this chart.

CREA senior economist Shaun Cathcart, the article reports, attributes the observed increase not to the BOC having reduced its target rate 75 basis points from June 1, 2024, to September 1, 2024, but to a "surge in new listings that hit the market in September."

It seems obvious that the BOC lowering its policy rate resulted in a "surge" in September in sellers confident that less expensive mortgages would increase the supply of buyers willing to meet the prices sellers listing properties would demand.

Evidence reported in the article confirming sellers were correct is that "the national average sale price for October amounted to $696,166, up six per cent compared with a year earlier."

I find it fascinating that the CREA seems unwilling to admit that increasing the supply of less expensive money supports real estate sellers demanding higher prices for their properties.

Note that house prices peaked in Q1 2022 when inflation, which had been rising steadily since Q1 2021, reached 5.7% and, inflation showing no sign of abating, it was inevitable that the BOC was going to raise interest rates. House prices rose sharply throughout 2021 into Q1 2022 as buyers sought to lock in mortgage rates in the 4% to 6% range before interest rates went up.

Condo prices peaked in Q1 2023 when, inflation showing signs of easing, buyers began waiting for the BOC to reduce interest rates.

House prices correcting after Q1 2022 and house and condo prices declining throughout 2023 undoubtedly played a role in the BOC's decision to lower interest rates beginning in May, 2024, its rationale being to prevent housing prices from declining further, which could threaten the stability of Canada's banks and secondary mortgage markets.

November 15, 2024 Bill Appledorf