January 15, 2021 | 10:01
Holiday Shopping 2020 Included Houses, Apparently
The Canadian housing market remained (insert favourite over-the-top adjective here) hot in December, with sales surging 47.2% above year-ago levels. And, to be clear, it's not as if things were especially soft a year ago. So, in seasonally adjusted terms, sales handily set a new all-time high last month. Some may downplay this result as landing in a quiet time for the market, and thus not especially meaningful. However, even in unadjusted terms, home sales reached nearly 40,000 units in December, close to a "typical" month prior to this year.
The late-year sales surge built on solid results in the prior six months, and left sales up 12.6% for the full year, also an all-time high, a remarkable result given the near shutdown of the industry in the key spring selling season. As well, the surge also left the market unusually tight, with just 2.1 months of supply (record low) and sales to new listings hitting 77.4% (normal is around 54%). Naturally, the ultra-tight market is pushing prices relentlessly higher, with the key MLS HPI index jumping 13% y/y. That compares with a moderate 3% pre-pandemic pace a year ago. The average transactions price, which doesn't adjust for quality changes, jumped 17.1% y/y. The combination of a big rise in the volume of sales and a big rise in prices means that the value of homes changing hands soared 72% y/y last month, and up 27% for all of 2020. That latter figure is the strongest since the housing boom year of 1988, and great news for realtors.
While we typically dive into the regional nuances at this point in the proceedings, there is actually very little nuance to discuss—sales spiked almost across the country at the end of the year, as the table below reveals. (There is still some nuance in prices, but the regional breakdown there is almost identical to a year ago—powerful gains in Ontario and parts of Eastern Canada, sluggish gains in Alberta. The only thing that has changed is that almost every city is stronger than a year ago.) This sweeping strength in sales heavily suggests that what's driving this market are broad overall factors, and not local economic factors. Specifically, the plunge in interest rates last year and the pandemic-driven move to upgrade have lifted all markets, and overwhelmed the dampening effect of lower population growth and weak job markets. Suffice it to say, it wasn't at all obvious that this is how things would play out 10 months ago.
Looking ahead: We expect the market to lose some momentum in the months ahead, as tighter mobility restrictions, the small back-up in long-term yields, the ongoing absence of immigration, and still-soft employment conditions will weigh. To be clear, we don't look for a reversal in the broader market, just some moderation from these extraordinary results. After all, "stay at home" doesn't translate to "don't buy a home".