October 15, 2021 | 09:51
Canadian Existing Home Sales (Sep.) — Walking on Tinder
Canadian existing home sales rose 0.9% in seasonally-adjusted terms in September, but were down 17.5% from a year ago—so is the market strong or weakening? Quite simply, this is still a very strong market. After falling sharply through the middle part of the year, the level of sales (i.e., demand) in September still sat 10% above pre-COVID levels, and 16% above the past-decade average. In fact, if not for the extreme ballooning early in the year, the headlines today would be highlighting record sales activity.
Meantime, new listings dipped 1.6% in the month, and are down 19.6% from a year ago, leaving the market to resume tightening. The sales-to-new listings ratio rose to 75.1%, while the months’ of inventory on the market fell for a second straight month, to 2.2—aside from earlier this year, this would still be off-the-chart tightness in the broad Canadian resale market.
Against that backdrop, there has been no relenting in price pressure. In fact, the dial might be turning hotter again as we speak. The MLS HPI rose 21.5% y/y, which is down from the early-year high (24.7%), but month-to-month gains are gathering steam again (up 1.3% in September after seasonal adjustment, which is 17% annualized). Gains over the past three months now clock in at 14.1% annualized; and the last six months sit at 16.5% annualized. However you want to dice it, the broad Canadian housing market appears to be operating with 15%-to-20% price growth, and no sign of cooling down.
By region: Tight conditions remain across most of the country, but Quebec and most of Ontario (including Toronto and Ottawa) had the strongest month-to-month sales gains in September. Across the 26 major markets tracked by CREA, 15 saw sales rise in September, though all but 4 are down from year-ago levels (base effects weighing broadly). On a market-balance basis, smaller cities around the largest centres remain tightest (e.g., Fraser Valley and Kitchener-Waterloo). That said, the largest cities are fully strong as well, with Toronto tightening notably in September.
By property type: We continue to now see relative balance between single-detached and condo price momentum, with the latter firming in recent months. Prices ares up 14.9% annualized over the past six months, versus 16.2% for single-detached. The time to grab a 'cheap' pandemic-era downtown condo is now long past.
The Bottom Line: One can't help but feel as though the Canadian housing market is walking on tinder again, with demand holding at historically high levels, listings getting quickly absorbed, and price growth running steady near a 20% pace. That said, five-year fixed mortgage rates likely face meaningful upside in the months ahead, which could act as a dampener. If not, or if there is a heavy rotation to variable and the market starts to accelerate again from here, talk of earlier Bank of Canada moves will only grow louder.