Rising, But at What Cost?

The Ottawa Metro real estate market in November strengthened, with sales rising above the 10-year average and new listings declining. However, there was also an unexpected increase in active inventory, and prices edged down. The rental market softened, with rent prices decreasing slightly, while new construction sales remained below historical averages. Mortgage rates and affordability showed little change, while housing starts and completions were strong. Labour market conditions improved, though mortgage arrears remained stable.

Sales in the Ottawa Metro area declined in November but increased slightly after the seasonal adjustment. A total of 1,059 sales were recorded—10% lower than last month, 48% higher than last year, and 4% above the 10-year average. This marked the first time in two years that sales exceeded the 10-year average. Typically, sales decline from May through December.

New listings fell in November to 1,352, representing a monthly drop of 35%, 5% lower year-over-year, but still 5% above the 10-year average. Listings generally decrease from September through December.

Active inventory rose in November both nominally and seasonally adjusted, reaching 4,036 units. This represented a 20% monthly increase, up 45% year-over-year, and was 44% above the 10-year average. Typically, active inventory decreases from May through December, making this uptick unusual. Considering the dynamics of sales and listings, such a big increase in active inventory could be potentially a data error, methodology change or some kind of adjustment.

The market balance indicator, Months of Inventory, weakened in November, standing 15% above the 10-year average. This was primarily due to a large increase in active inventory. The market balance usually weakens between October and January.

The Sales-to-New Listings ratio, another market balance indicator, strengthened in November, reaching the 10-year average level. It typically weakens from September to December. Overall, Ottawa’s real estate remains a balanced market.

Ottawa real estate prices declined slightly in November, with the benchmark price, which represents a typical property, falling by 0.4% to $636,700 compared to the previous month. Prices were 2-6% higher than last year and 12-13% below their 2022 peaks. The benchmark price has been gradually increasing over the past two years.

In October, the average rent for one- and two-bedroom units in the Ottawa Metro area decreased slightly to $2,281. This matched last year’s value but was 3.6% higher than 2022. The annual rent price increase continues to decline, indicating a weakening rental market.

New construction sales in October were 11% below the 6-year average. Over the past 12 months, 3,424 units were sold, 25% below the historical average.

The median price of new construction single-family units reached $930,000 in October, up 0.5% from the previous month, down 2% year-over-year, and 11% below the peak. Prices have slightly declined over the past two years.

Housing starts were strong in October, exceeding the 10-year average by 23%, driven largely by apartment units. Over the past twelve months, construction began on 11,285 units – 3% above the historical average.

Housing completions in October were 48% above the 10-year average. Over the past 12 months, 11,779 units were completed in the Ottawa Metro area, 23% higher than the historical average.

In November, the lowest 5-year fixed mortgage rate dipped by 0.05% to 4.04%, while the lowest 5-year variable rate rose by 0.1% to 4.85%. This widened the gap between the two to 0.81%.

Stable prices and mortgage rates kept housing affordability steady in November. Mortgage payments for a typical property in Ottawa Metro still require 33% of a typical household’s income, unchanged from the previous month.

Ontario’s unemployment rate fell slightly to 6.8% in October, still 10% higher than the previous year and 2% above the 10-year average. National unemployment remained at 6.5%, 2% below the 10-year average.

Ontario’s mortgage arrears rate remained at 0.16% in August, a 78% annual increase and 50% above the 10-year average. Nationally, the arrears rate stayed at 0.20%, up 33% year-over-year but still 11% below the 10-year average.