Canadian Home Sales Appear to be Stabilizing but Prices Re-Accelerating

On Friday, October 15, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of September. Below, CREA’s Director and Senior Economist, Housing Data and Market Analysis, Shaun Cathcart provides an update on the current state of housing markets in Canada and explains what the data means for members.

September provided another month’s worth of evidence that housing market conditions in many parts of Canada are stabilizing near current levels.

The small changes observed in many key housing market metrics over the last couple of months suggest the worst of the pandemic-related ups and downs we’ve been experiencing since spring 2020 may be in the rear-view mirror, at least for now.

In some ways that comes as a relief given the volatility of the last year-and-a-half, but the problem is demand/supply conditions are stabilizing in a place that nobody’s happy about.

There’s still a lot of demand chasing an increasingly scarce number of listings. We’re still stuck at around two months of inventory nationally (the average is more than five), so the thing to keep a close eye on going forward will be the behaviour of prices.

Indeed, the monthly deceleration trend in prices ended back in mid-summer. We had been watching prices heat up in some markets as early as June, but August saw the national measure pick up resulting from a re-acceleration of price growth in a critical mass of local markets.

MLS® Home Price Index Benchmark price up 1.7%

That trend really took off in September, with the Aggregate Composite MLS® Home Price Index (HPI) Benchmark price advancing by 1.7% or $12,300 on a month-over-month basis. That’s a big gain for a single month.

If you look historically, it has only ever climbed by more dollars in a single month six times—the first four months of this year, last July, and March of 2017. As you’ll recall, all of these were the very hottest of hot markets. The difference between then and now is that back then we all knew we were in historic seller’s markets and everyone was talking about it.

I feel like right now people are still under the impression all that ended a little after Easter weekend, but it likely didn’t. I think maybe with vaccines and the summer we all finally had something other than housing to focus on, and to be fair prices did look like they were topping out for a while there.

Fall street

Supply levels tight

But two months of inventory is two months of inventory. Sales have come down from this spring but so has supply therefore market conditions are basically the same. To be precise, they have tightened a bit in the last couple of months.

Sales in September were still the second-best ever for that month, while new listings dropped to a 16-year low for September.

Meanwhile, end-of month inventories are at an all-time low. On a seasonally adjusted basis, the number of listings left on the market at the end of the month will likely fall below the 100,000 mark for the first time ever by the end of the year. It may not, but the fact that it has been trending lower for more than six years now makes a few more monthly declines a pretty good bet. Anyway, the point is it’s basically at 100,000 now. Six years ago, it was at 250,000.

It took a long time, but popular opinion seems to have almost fully coalesced around the idea that Canada really does have a serious housing supply problem, as evidenced by all of the party platforms in the recent federal election.

That said, I think most people would also say at least we aren’t looking at the kind of market we saw back this spring. Well …

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As our Director and Senior Economist, Housing Data and Market Analysis, Shaun Cathcart provides housing market intelligence to Boards, Associations, members, and real estate industry stakeholders. He spends much of his time analyzing and writing about Canadian housing trends. In his downtime, you can find him on his bike, on the volleyball court, and enjoying time with his family.

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