April 15, 2021 | 10:01
Canada's Towering Inferno
Before digging into the details, let's highlight one key fact in today's Canadian existing home sales release—new listings hit their highest level on record in seasonally adjusted terms in March. Please keep that simple fact in mind when you hear the inevitable onslaught of rhetoric about how the housing market's imbalance is all about weak supply. The only possible world in which supply can be considered anything remotely in shortage is when stacked up against the extraterrestrial level of demand. Sales rose another 5.2% in s.a. terms last month to a record high, lifting them 76.2% above year-ago levels. You don't like the comparison to a year ago, because that marked the start of the shutdowns? Okay, sales last month were more than 80% above the March 2019 level, and 66% above the average monthly pace of the past decade. Same story on prices; average prices were up a record 31.6% y/y, and 48.1% above March/19. That two-year jump absolutely shatters the prior record gain, seen back in the bubble days of the late 1980s.
How to describe last month's strength? Powerful, robust, stout, stalwart, strapping, hardy, burly, husky, leathery, brawny, thewy, sturdy, sinewy, virile, muscular, wiry, limber, hale, hearty, vibrant, hard as nails, hard-fisted, athletic, gymnastic, able-bodied, broad-shouldered, well-built, strong as a lion/horse/ox/bull, titanic, gigantic, Herculean, mettlesome, and in fine feather/fettle. Phew (and thanks Roget's Thesaurus).
The staggering sales and price gains were spread right across the country, with 23 of 26 major markets posting at least double-digit price increases, and 18 of those above 20%. Even with the 50.7% y/y surge in new listings, the stock of inventory fell to an all-time low of just 1.7 months, a record-tight market and compared with a normal level of 5 months. The trend of buyers flocking to more pricey single-family homes is pumping up the headline transaction price gain; but even the MLS HPI, which adjusts for quality changes, has leaped 20.1% y/y. At least 14 separate markets have seen increases of more than 35% in the past year by this measure, all in Ontario. And while there are still a few markets posting "only" moderate increases, almost every major city is now deep in sellers' market terrain, so bigger price gains lie ahead for these areas as well.
Key takeaways: The pace of Canadian home sales and prices is simply in unchartered territory. Block out the noise about comparisons to last March—by any metric, sales were far above and beyond anything seen before. Block out the noise about how this is a low supply story—new listings were the highest on record last month, but were vapourized by scalding demand. Given the extreme market imbalance currently at play—almost entirely due to fiery demand—look for the record pace of price gains to spread far and wide beyond Ontario.