November 16, 2020 | 10:23
Canadian Existing Home Sales (Oct. 2020) — The Exodus Continues
Canadian existing home sales dipped 0.7% in seasonally-adjusted terms in October, but they were up a still-gawdy 32.1% from year-ago levels. Keep in mind that we’ve just seen three months of record sales activity, partly due to pent-up demand after activity was shuttered during the spring, so some easing of sales should be expected. That said, sales on a year-to-date basis are now up 8.6%, and this year’s total volume looks like it will handily eclipse 2019. So, there’s more than just making up for lost time going on and, as we’ve been arguing since the pandemic began, there appears to be a wholesale shift in housing preferences that is seeing households trade out/up to more space outside of core urban markets.
New listings rose a modest 2.9% in October, leaving the market still extremely tight. The national sales-to-new listings ratio fell a few notches to 74.3%. While down from the prior month, that still effectively reflects the tightest market in 15 years or so. New listings are also a flow measure than can get a bit distorted by things like the same property getting re-listed to keep it fresh or tweak the price. The months’ supply of homes for sale (i.e., the stock) is the better measure, and that fell again to a record-low of 2.5 in October.
Very limited supply in areas that are seeing an influx of demand is boosting prices, with the pace across many markets ranging from solid to historic. The national MLS HPI rose 10.7% y/y in October, the strongest pace since August 2017. Every major market tracked by CREA on this basis is up from a year ago, ranging from very modest gains of 1%-to-1.5% in Calgary and Edmonton (which is not a disappointment all things considered), to more than 20% y/y in Ottawa and various markets outside the Greater Toronto Area. The average transactions price was up 15.2% y/y, and the dollar volume of home sales was up a massive 52% y/y. The latter is up 21% y/y on the year-to-date basis—hence the acceleration in residential mortgage credit growth this year.
A few more observations:
The Bottom Line: As it turns out, 2020 will be a banner year for the Canadian housing market. Pent-up demand might be running its course now, but there’s still a fundamental shift in preferences toward larger properties outside of core urban areas, greased by record-low mortgage rates. And, when there’s not much to choose from, prices lurch higher…