November 15, 2021 | 10:01
Canadian Existing Home Sales (Oct.) — The Fire Still Burns
Canadian existing home sales jumped 8.6% in seasonally-adjusted terms in October (-11.5% y/y), and the market has fully firmed up again after 'slowing' through the summer. No surprise here. The market is still drum tight, and demand is still feasting thanks to low mortgage rates, a strong job market, expectations of continued price gains, and probably some additional activity ahead of mortgage rate hikes (especially for those with a contract in hand). Indeed, the level of sales volumes in October sat 32% above the 2019 (pre-COVID) run rate; the dollar-value of sales was a cool 86% above that mark; and the benchmark price has now surged 40% (70% or more in some markets)—and that baseline reflected strong later-cycle conditions, not a period of weakness that would make for an easy comparison. Governor Macklem opined in the FT this morning that “it is better to focus on outcomes than on timelines”, and this is one area where the “outcome” has been screaming for tighter policy for almost a year already. The volume in this latest round of data is not going down.
With that, here are some more details: New listings rose 3.2% in the month, but are still down more than sales (-19.6% y/y) from a year ago, but coming to market roughly a ‘normal’ pre-COVID pace. This is keeping the broad market very tight as sales jump again. In fact, the sales-to-new listings ratio rose to 79.5% in October, trailing only the extremes seen very early this year (a record otherwise). Similarly, the months’ of inventory on the market dipped to 1.9, nearly matching the off-the-chart tightness in the broad Canadian resale market seen in the spring.
Price momentum is accelerating again, as it will do against that backdrop. The MLS HPI rose a heated 2.7% in October alone (seasonally adjusted), or 23.4% from a year ago. The monthly gain is again in the neighbourhood of the highest marks seen at the heights of early-2017 and early-2021. Annualized growth over the past three months is running at 24.4%; and it's running at 19% over the past six months.
By region, tight conditions remain across most of the country. In October, sales rose on a month-over-month basis in all 26 major markets tracked by CREA, with the exception of Newfoundland & Labrador. Smaller markets around the perimeter of the biggest cities continue to lead price growth, but the urban centres are strong as well. Condo prices also continue to gather momentum, up almost 20% annualized over the past three months, and 15% from a year ago.
The Bottom Line: The Canadian housing market is well overdue for higher rates, and momentum is still pointing upward until it gets them.