Monday Market Minute | Nov 27, 2023

Housing market stabilizes heading into year-end as rate cut hopes build

What Moved

CREA data for October showed the housing market had reached a stable equilibrium — neither recovering nor declining, but operating at reduced volumes with stable prices. National benchmark prices had risen modestly from the spring trough but remained well below the 2022 peak. The GTA and GVA showed the most resilience, supported by immigration-driven demand and constrained supply. Growing market confidence in 2024 rate cuts provided a psychological floor, keeping sidelined buyers engaged even if they were not yet transacting.

Why It Matters

The housing stabilization was constructive for private real estate portfolios. NAV stability meant fund valuations were reliable, a critical factor for investor confidence and capital raising. MIC portfolios saw collateral values holding firm, supporting LTV compliance. The forward-looking dynamic was equally important: if rate cuts materialized in 2024 as priced, housing would likely see a meaningful recovery, creating a mark-to-market tailwind for investors who maintained exposure through the downturn. The best time to own real estate was often when it felt most uncomfortable.

Signal to Watch

Pre-construction condo absorption rates in the GTA for Q4 would indicate whether developers could restart the sales pipeline that had been frozen for most of 2023 — a leading indicator of development lending demand for 2024.

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