May 17, 2021 | 09:54
Canadian Existing Home Sales (Apr.) — To the Moon...and Back?
Canadian existing home sales fell 12.5% in April, as activity pulled back from astronomical levels. To keep things in perspective, sales in the month were still running 45% above the 10-year average, so demand is extremely strong even if down from record levels. That said, a few factors are likely contributing to fade in momentum: Mortgage pre-approvals at record-low rates running their course (5-year fixed rates have backed up about 30 bps from their lows); the Bank of Canada's more hawkish tilt tweaked the conversation on interest rates ever so slightly (and that is a very powerful mechanism); there might finally be some light at the end of the pandemic tunnel even though cases were still high in April; stay-at-home orders may have played a role as well; and we might finally be seeing some buyer fatigue.
New listings pulled back as well, but they too are running well above (13%) the 10-year average. Supply just continues to get swallowed up by even stronger demand. That said, the sales-to-new listings ratio fell for a third straight month, but at 75% nationally, it still remains a firm sellers' market. There is still an extremely low 2 months' worth of inventory out there at the current sales pace.
Against that backdrop, prices continue to run, with the MLS benchmark up 23% y/y. Remember that prices this time last year were not depressed, so this is true strength. Over the past six months, prices are up 29% annualized; and over the past three months they're up 37% annualized. And, those are national figures that mask the fact that some markets (especially cottage country) are up more than 70% annualized over the past three months.
By region: It's as close to wall-to-wall strength that we've probably ever seen in this country. Long-dormant markets like Calgary and Edmonton are awake again with prices up roughly 9% y/y; Toronto, Montreal and Vancouver remain strong as usual; some smaller markets (think Halifax, Moncton, Southwestern Ontario) are even stronger than the big cities; and cottage country is to the moon (insert emoji).
By segment: Single-detached remains extremely strong, but earlier signs that condo markets in the large cities were tightening up continue to play out. Condo prices were up 8.5% y/y in April, the strongest pace since mid-2018, and price gains are now running even stronger month-to-month in the biggest cities. We continue to expect these markets to come back stronger than most might think.
In a separate release, Canadian housing starts fell to 268,600 annualized units in April from the blowout (334.8k) month in March. While down sharply month-over-month, this is still is an extremely strong level of new construction activity in Canada by historical standards. In fact, average annualized starts over the past six months are running at the strongest level on record, topping building booms in the 1970s and 1980s. All regions but the Prairies and Atlantic Canada saw lower starts in April.
The Bottom Line: Headlines will probably flag housing market declines in April, but don't them fool you...this market is still extremely strong across geography and segment, even if we've likely seen peak momentum. It's still a long way back from the moon.