September 15, 2020 | 09:51
Cdn. Existing Home Sales (Aug. 2020) — The Heat is On
Canadian existing home sales rose 6.2% in seasonally-adjusted terms in August (+33.5% y/y), the highest level on record by that measure. Keep in mind that the market was effectively shut down through the (normally very active) spring season, so pent-up demand is still at work (and possibly distorted a bit by the seasonal factor). Year-to-date, raw sales are now a touch higher than a year ago, giving a cleaner picture of what is truly going on. That is, sales have quickly filled in most of the hole left during the COVID-related lockdowns earlier in the year. That said, there might be some pent-up demand still to satisfy as the level of sales was notably stronger heading into the pandemic than it was in early-2019. If we assume the new run-rate will settle somewhere in between, then it looks like we’ve just about caught up on a national basis.
New listings also jumped again in August, rising 10.6% in the month. That marks the first time since the market re-opened that listings outpaced sales, which pulled the national sales-to-new listings ratio down a few notches to 69.4%. That still reflects the tightest market in 15 years or so. Indeed, the months’ of inventory on the market hit a record-low 2.6 in August. If you’re left thinking, “this sounds like a recipe for higher prices”, you are correct. The average transactions price jumped 18.5% y/y in August (to a record high), while the MLS HPI accelerated to 9.4% y/y.
One change in August is that some regional disparity is starting to show again, after all markets were rebounding in unison in recent months. Month-over-month, sales were driven by gains in Toronto and surrounding markets, as well as Vancouver/Victoria, but others like Calgary and Regina have ebbed. And, while price growth is well into double digits in Toronto, Montreal and Ottawa (the latter now 20% y/y), prices in Calgary are still down from a year ago. We suspect this regional split will re-establish itself as the dust settles.
For a look at the factors that have shaped the housing market through the pandemic, and some questions going forward, you can check out last week’s Focus feature—Betting Against the House: Canadian Real Estate Through the Pandemic.
The Bottom Line: The Canadian housing market has come back stronger than even the most hardened bulls imagined, and policymakers seem willing to let it run. That said, it’s looking like pent-up demand is just about running its course, and we’ll see where underlying sales settle. Some areas of the country will probably stay quite hot. Others, not.