Canadian home sales changed little in November, showing a slight decrease of 0.6% from October. Increases in the western provinces balanced out declines in areas like Nova Scotia (-13.0%) and Ontario (-1.5%). Although there was a 0.9% rise in October, sales remained below the usual levels. Seven out of ten provinces saw a drop in transactions. However, improvements were reported in British Columbia (+2.6%), Alberta (+2.7%), and Saskatchewan (+3.4%).

Real Estate Transactions Stay Consistent

Real estate transactions have been steady since July, largely unaffected by the Bank of Canada’s rate cuts. Despite a peak in November 2024, sales are currently 7.6% lower due to ongoing trade uncertainties. There is optimism for the residential market. Expected policy rate cuts and a strong job market may boost demand soon. Economists believe these factors could help increase transactions in the coming months. The stable housing market indicates that the Bank of Canada’s recent rate cuts are taking time to impact the economy. The Bank lowered its policy rate by 25 basis points in September and October to 3.75%, yet sales remain historically low. This suggests that traders should be prepared for the Bank to maintain steady rates into early 2026, keeping short-term bond yields relatively stable.

Opportunities and Risks

The positive outlook for the next few months, driven by a stronger job market, suggests potential gains for the Canadian dollar. The latest Labour Force Survey, released on December 5th, reported the addition of 45,000 jobs, lowering the unemployment rate to 5.6%. This could support the housing recovery that policymakers hope for, making call options on CAD versus USD a potentially interesting strategy in the first quarter. The difference between a weak housing market in the east and a strong one in the west creates specific investment opportunities. Traders might want to focus on Canadian bank stocks, which benefit from rising mortgage activity, especially those heavily invested in British Columbia and Alberta. Additionally, real estate investment trusts (REITs) that target residential properties in these western provinces could attract renewed purchasing interest. However, notable risks persist, particularly with ongoing uncertainties regarding the 2026 CUSMA trade agreement review. The market’s swift changes during the rate-hiking cycle of 2022 and 2023 serve as a reminder; thus, it’s wise to hedge against potential downturns. Buying put options on Canadian real estate ETFs could provide a safety net against any unforeseen economic changes. A housing rebound might also create new inflation challenges for the Bank of Canada. While November’s CPI report showed inflation at 2.9%, rising home prices could drive inflation up again. This might require the Bank to adopt a more hawkish stance later in 2026, which isn’t fully reflected in interest rate swaps yet. Create your live VT Markets account and start trading now.

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