Affordability concerns are continuing to keep pressure on Canada's housing markets heading into the winter months, the Canadian Real Estate Association (CREA) reported.

The month saw continued declines in both national sales and average asking prices. Sales edged down 0.9% from October and are 0.9% below year-ago levels, according to the latest monthly data.

"Not getting offers they were willing to accept, it's looking like many [buyers] are now resigned to hunker down until next year," said CREA's senior economist Shaun Cathcart.

The average national selling price was $646,134, down 1.6% from October but still 2% above November 2022. Regionally, the largest month-over-month declines were seen in Prince Edward Island (-4.9%), New Brunswick (-4.5%) and Manitoba (-3.7%). In Ontario, prices are down 1.3% from October and 5.9% from a year ago.

Prices continued to rise in Newfoundland and Labrador (+4.1% month-over-month), B.C. (+0.2%) and Alberta (+0.1%).

The MLS Home Price Index, which accounts for seasonality and differences in property types, posted a 1.1% monthly decrease but is also up 0.6% year-over-year. 

Where does the housing market go from here?

High interest rates, a typically slower homebuying season and potential economic headwinds ahead are likely to keep prices under pressure heading into 2024, observers say.

"With interest rates likely to stay high in the near term, we expect elevated ownership costs to remain a deterrent for homebuyers," economists from RBC noted. "That should keep activity very soft in Ontario and B.C. where affordability is most stretched."

BMO’s Robert Kavcic agrees, but sees upward price pressure returning later in the year.

"We see some further downward pressure on prices in some markets through the spring of 2024 (namely Ontario), but the combination of pent-up demand and easing borrowing costs could finally put a floor under the market," wrote BMO’s Robert Kavcic.

"At the same time, market psychology will surely improve given that we have a clearer view of what the worst-case borrowing-cost conditions look like," he added. "This, of course, all assumes that the economy holds up relatively well (i.e., stagnant growth, but no deep recession or widespread job loss)."

Inventory continues to rise

CREA also reported a continue build in housing inventory, with its months of inventory measure climbing to 4.2, up from 4.1 in October and 3.7 in September.

Even so, new listings were down 1.8%, the second straight month of decline, "as prospective sellers opt to wait until more favourable conditions emerge," wrote Marc Desormeaux of Desjardins.

Still, a rise in new listings nearly every month since April means new listings are still roughly 30% above where they were in March. "That gain and its breadth across regional markets suggests that many individuals who bought homes in a lower-rate environment are now struggling with sharply higher borrowing costs," he said.

Existing home sales data for December is expected to be released on January 15, 2024