I was asked to write a 2020 year in review post for this blog. So, I thought about it.
First of all, I hope all of you have managed to stay safe (and sane)!
It’s been a crazy year for everything, including Canadian housing markets which our small team here at CREA is tasked to track and report on.
I think it’s too easy to look at it in the rear-view mirror and recap what actually happened. We know that story. Instead, I think a more interesting way to look back on 2020 is to remember what it felt like at the time and what we were thinking throughout the year.
During the second week of March, my colleagues and I were in the process of finalizing our first forecast of the year. I came home late from a volleyball game on March 11. I couldn’t go to bed right away, so I jumped on reddit—travel from China banned! NBA season cancelled! What the heck!
The next evening, March 12, my son and I went to the grocery store to get an XBOX gift card for his buddy’s birthday, but also, I wanted to check out what the deal was. There were lines to the back of the store—carts piled as high as I’ve ever seen. On the shelves there was no flour, no peanut butter, no bread, no sugar, no pasta, no canned goods, a frozen food section that would put Old Mother Hubbard’s cupboard to shame—this was not good! Organic section for all of these? Still stocked, LOL.
We made the decision the next morning to put our forecast for “a record-smashing year for Canadian housing markets” up on blocks. It was probably the right decision, as the Bank of Canada later did the same with their forecasts; although, it’s funny how in the end, ours would have ended up being right, somehow!
Three statisticians go hunting and come across a deer. The first one aims his rifle and takes a shot … misses 10 feet to the right. The second one aims his rifle and takes a shot … misses 10 feet to the left. The third one yells, “We got him!”
Sorry, that’s a mean joke!
Anyway, we turned our efforts from forecasting to “nowcasting”, using daily data to keep as up to date on the rapidly changing narrative as possible without trying to look too far into a very uncertain future. I think it was a good call.
We have one chance to comment on our monthly data each month in our national housing statistics news release. Much like my campfire guitar playing, we may have missed a few chords, but I think we got the tune right. These are the quotes from each monthly release this year … the 2020 year in review:
“Looking at local market trends across the country, one thing that stands out in markets with historically tight supply is a larger than normal drop in new listings at this time of the year. The logic being that if you are a seller, you’re not just choosing when to list but effectively when to sell, so why not hold off until the spring when the weather is better and more buyers are looking? Deferred listings mean deferred sales, which could explain some of January’s decline in activity. The question going forward is how many sellers are out there waiting to list their property, how much demand will respond, and how that will impact prices later this year?”
“Following a quieter than normal December/January period, February saw a burst of new listings in some of Canada’s most supply-starved markets, so it was not a surprise that sales were up alongside that increase in new supply. There is some question about how much pent-up demand remains in parts of the country where listings have been low for some time now. That said, it will take more than one month of increased new listings to even start to turn some of these markets towards some semblance of balance. In the meantime, expect competition among buyers for available listings to continue to drive prices higher.”
“Numbers for March 2020 are a reflection of two very different realities, with most of the stronger sales and price growth recorded during the pre-COVID-19 reality which we are no longer in. The numbers that matter most for understanding what follows are those from mid-March on, and things didn’t really start to ratchet down until week four. Preliminary data from the first week of April suggest both sales and new listings were only about half of what would be normal for that time of year.”
“Like so many other parts of normal daily life, a lot of buying and selling activity in housing markets across Canada has been put on pause. That said, preliminary data for May suggest things may have already started to pick up a bit for both sales and new listings, in line with evidence that new and existing virtual technology tools have been adopted by REALTORS® and their clients. These tools have allowed quite a bit of essential business to safely continue and will likely remain key for some time.”
“May’s housing numbers are certainly a mixed bag of results – sales and new listings are both way up month-over-month but still way down compared to a year ago. The big picture is things are moving in the right direction but still have a long way to go. That said, under the surface those numbers have been steadily rising from mid-April right through the first week of June, so June may end up a similar story. With sales and new listings moving down and now back up in tandem, and overall supply still falling, prices appear to be holding firm at this point.”
“While June’s housing numbers were mostly back at normal levels, we are obviously not back to normal at this point. I guess the bigger picture is one of cautious optimism. The market has recovered much faster than many would have thought, but what happens later this year remains a big question mark. That said, daily tracking suggests that July, at least, will be even stronger.”
“What a difference three months makes, from some of the lowest housing numbers ever back in April to the multiple monthly records logged in July. A big part of what we’re seeing right now is the snap back in activity that would have otherwise happened earlier this year. Recall that before the lockdowns, we were heading into the tightest spring market in almost 20 years. Things may have gone quiet for a few months, but ultimately the market we’re seeing right now is mostly the same one we were heading into back in March. That said, there are some new factors at play as well. There are listings that will come to the market because of COVID-19, but many properties are also not being listed right now due to the virus, as evidenced by inventories that are currently at a 16-year low. Some purchases will no doubt be delayed, but the new-found importance of home, lack of a daily commute for many, a desire for more outdoor and personal space, room for a home office, etc. will certainly also spur activity that otherwise would not have happened in a non-COVID-19 world.”
“It will come as a surprise to many that as of the end of August, home sales in 2020 had fully caught up to where we were at that time last year; however, that is somewhat of a low bar as the first half of 2019 wasn’t really anything to write home about. A more useful comparison would be to ask where are we now versus where we thought we’d be before anyone had ever heard of COVID-19, and on that score there is still a lot of catching up to do. Despite some record monthly highs and lows this year, with eight months now in the books and activity showing signs of moderating in September, 2020 is looking like it will go down as a fairly middling year overall – weaker than in a non-COVID world but quite a bit better than we would have given it back in April.”
“This is starting to sound like a broken record (about records being broken), but Canadian home sales and prices set records once again in September amid record-tight overall market conditions, as they did in July and August. Reasons have been cited for this – pent-up demand from the lockdowns, Government support to date, ultra-low interest rates, and the composition of job losses to name a few. I would also remind everyone that sales were almost setting records and markets were almost this tight back in February, so we were already close to where things are now, as far away from Goldilocks territory as we had ever been before. But I think another wildcard factor to consider, which has no historical precedent, is the value of one’s home during this time. Home has been our workplace, our kids’ schools, the gym, the park and more. Personal space is more important than ever.”
“For anyone waiting for the Canadian existing home market to begin to settle down following this summer’s surprisingly strong recovery, they’re going to have to wait a little longer. It was evident that the same trends we’ve been seeing since July – record sales and record prices amid tight overall supply – was once again the story in October. As we’ve moved through the last few months of headline-grabbing data, we’ve seen sales activity for the year-to-date not just catch up with last year, which was surprising enough, but at this point activity in 2020 has a real shot at setting an annual record. Many reasons have been suggested for why this is when many traditional drivers of the market, economic growth, immigration, employment and confidence in particular, are currently so weak. Something worth considering is how many households are choosing to pull up stakes and move as a result of COVID-19 and all the associated changes to our lives. We could be seeing a lot of moves, or churn in the market, that would not have happened in a non-COVID world.”
“If I had to sum up the Canadian housing story in 2020, I would say it’s gone from weakness because of COVID to strength despite COVID. It will be a photo finish, but it’s looking
like 2020 will be a record year for home sales in Canada despite historically low supply. We’re almost in 2021, and market conditions nationally are the tightest they have ever been and sales activity continues to set records. Much like this virus, I don’t see it all turning into a pumpkin on New Year’s Eve, but at least vaccination is a light at the end of the tunnel. Immigration and population growth will ramp back up, mortgage rates are expected to continue to remain very low, and a place to call home is more important than ever. On top of that, the COVID-related shake-up to so much of daily life will likely continue to result in more people choosing to pull up stakes and move around. If anything, our forecast for another annual sales record in 2021 may be on the low side.”
Big thanks to my colleagues Chris Jokel, Doug Blissett, Ryan Biln and Jacob Coopersmith for a great team effort this year in trying and get this story as right as possible for our REALTOR® members (first and foremost) and anyone else who was interested in what was going on in Canadian housing markets. I would also like to thank our now retired former boss, Gregory Klump, for giving us all a chance to work here at CREA, along with all the opportunity and encouragement to “drink from the firehose.”
What a year 2020 has been! There is a riddle that asks, “how far can you walk into a forest?” The answer is “halfway” because after that you’re walking out. I would like to, very sincerely, wish all of you the very best for 2021.