July 15, 2021 | 10:02
Canadian Existing Home Sales (June) — It's All Relative
Canadian existing home sales fell 8.4% in seasonally-adjusted terms in June (+13.6% y/y), continuing the pullback from extreme levels seen early in the year. But, don’t be fooled—this is still an extremely strong level of demand and was actually the highest level of June activity on record. Seasonally adjusted sales, despite the steep pullback, remain roughly 18% above pre-pandemic trends. In other words, if not compared to the early-year inferno, the headlines today would about record strength in housing demand.
Meantime, new listings were little changed in June. Contrary to popular belief, supply is coming to market at a solid clip, it just doesn’t feel like it when it gets quickly vapourized by buyers. For example, new listings over the past three months have run roughly 10% higher than that seen through 2019. That said, the market balance eased further in June, with the sales-to-new listings ratio down to a still-tight 69.2%, after pushing above 90% early in the year, while the months’ of inventory rose for a third consecutive month. Still, the latter is well below anything seen before the pandemic.
Against that backdrop, prices continue to rise at a strong clip. The MLS HPI was up 24.5% y/y in June, the fastest pace since at least 2000. Shorter-term changes (i.e., over the prior 1- and 3-month periods) are ebbing, but they continue to run at double-digit annualized rates. Strength remains broad across the country, led by smaller markets and cottage country—some regions, especially in Ontario, have seen 40%-to-60% price increases over the past year. Among the larger cities, Montreal and Ottawa lead the pack with gains north of 20% y/y, while even long-stagnant markets in Alberta and Saskatchewan are now clocking double-digit runs.
It’s also notable that this is no longer just a ‘hunt-for-space story’, as national condo prices have accelerated into double-digit territory, up 12.2% from a year ago. Over the past three months, condo prices are up more than 19% annualized and outperforming single-detached homes for the first time since the pandemic started.
The Bottom Line: Home sales have backed off extreme levels seen in recent months, but demand is still historically strong and driving strong price growth. We believe that sales activity will continue to gradually cool in the year ahead, but it’s going to take higher interest rates to soften the market in a meaningful way.