On Tuesday, December 15, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of November. Below, CREA’s Senior Economist Shaun Cathcart provides an update on the current state of housing markets in Canada and explains what the data means for members.
November 2020 was yet another month of strong housing activity across Canada. It was the best month of November ever by a margin of more than 11,000 sales—which is a lot. Effectively, the same story as July, August, September and October.
As we approach the end of 2020, year-to-date sales are only trailing the 2016 record by three tenths of a percent or about 1,600 transactions—which is not a lot. With December looking a lot like the last five months, I’d say a new annual sales record in 2020 is likely a lock—not typically a bold call at this point in the year, but this will be a photo finish. I don’t expect the markets to pass the 2016 sales record until the third or fourth week of December.
Imagine how strong that number could have been without the COVID-19 pandemic and subsequent lockdowns.
The vaccines have started to arrive and at this point I don’t think we’re expecting the entire world to shut down again. So, what might we expect in 2021? Look at the trends going on right now and remember 2021 is only a couple of weeks from now.
The biggest challenge for the market in 2021 will be on the supply side. There were only 2.4 months of inventory at the national level in November, a record low. In Ontario it’s half that. For reference, the previous national record low from 2004 was 3.4 months. That’s a full month higher than what it is now!
If we get a rush of new listings in the spring, sales could go even higher than they are now. If we don’t, sales numbers could be lower, and that excess demand could spill over even more onto the price side.
CREA is forecasting national MLS® home sales to be about 583,600 in 2021. That would be a record, and an increase of 7.2% from 2020. This will sound optimistic to some, so let me add some perspective. If you take the seasonally adjusted November sales figure and annualize it (SAAR), it was running at around 664,000 sales. If we were to maintain that pace, basically what has been happening right through the second half of 2020, we would hit our forecast target for next year by Thanksgiving. So, it’s actually somewhat conservative. We’re anticipating a moderation in the trend. The big difference is we’re expecting to actually have a spring market next year. And really, wouldn’t it be more surprising if 2021 forecasts were worse than 2020?
The national average price is forecast to rise to by about 9% to more than $620,000 in 2021. Again, that may seem high at first glance, but we’re already at more than $600,000 and starting next year with the biggest demand-supply imbalance ever.
As we cruise through the last little bit of this crazy year, with sales still setting records and demand-supply conditions the tightest they have ever been, do you see this all turning into a pumpkin at midnight on New Year’s Eve? I don’t.
This may seem obvious, but people need to live somewhere. International immigration was extremely strong in the lead-up to the COVID-19 pandemic and it will be again for years and decades. Along with that big millennial cohort moving out of their 20s, through their 30s and now into their 40s, we have a lot of first-time home buyer demand, which is why everything is getting bought up. First-time buyers absorb inventory. For anyone waiting for the baby boomers to flood the market with supply, they’re currently aged 56-74. Research has shown there won’t be a big outflow from ownership housing until the 85+ zone. We need to build more!
This may not get as many page views as the doom and gloom stories we all read for the last decade or longer (note to housing bears: we’re still waiting on that big crash … maybe the 2020s will be your decade), but I think the “more households equal more housing demand” story, while it’s maybe more boring, is one that basically writes itself.
OK, I’m closing the book on 2020. I wish you all a safe and happy holiday season, with best wishes and fingers crossed for the New Year. I’ll be back with an update in January.
To view a more detailed look at national housing statistics, visit creastats.ca.