HOME SALES EASE UP, BARELY
SUMMARY
Canadian home sales eased 0.7% (sa m/m) lower in October. It was the first national-level decline since the plunge witnessed in April during the peak lockdown period, but sales remain near record highs: last month was still the strongest October on record. New listings climbed 2.9% (sa m/m) to pull the sales-to-new listings ratio down to 74.3%—2.6 ppts lower than last month but nonetheless indicative of supply-demand balances strongly favouring sellers. That persistent market tightness contributed to a 10.9% (nsa y/y) jump in the composite MLS Home Price Index (HPI)—the steepest since July 2017—with single-family homes continuing to anchor price appreciation.
Sales decreased in more than half of the markets we track in Ontario, including Toronto and Ottawa, while listings were up in two thirds and especially strong in Ottawa, London and Guelph. Accordingly, sales-to-new listings ratios fell in most jurisdictions, while MLS HPI gains broadly continued to accelerate, likely due to ongoing supply-demand tightness. The single-family home segment remained the principal driver of home price appreciation, though its strength relative to other unit types was less pronounced outside of Ontario’s Greater Golden Horseshoe agglomeration. Ottawa in particular continued to witness hefty gains of more than 20% y/y across all segments of the market.
In Southern BC cities also yielded mixed sales results. Abbotsford, Kelowna and Victoria witnessed month-over-month increases in purchasing volumes, while Vancouver sales fell back for the first time since April. New listings rose in all centres but Kelowna. Prices accelerated across the board, underpinned by particularly strong gains in the single-family home category.
Municipalities in the net oil-producing provinces similarly saw mixed results in October. Sales increased in Calgary, Edmonton and St. John’s, but fell in Lethbridge, Regina and Saskatoon. Despite modest-to-muted demand-side pressures last month, major cities in Alberta and Saskatchewan all witnessed y/y MLS HPI increases; for Calgary, it was the first such gain since 2017.
IMPLICATIONS
Time will tell whether October represents an off month or the beginning of a meaningful slowdown in Canadian housing markets. With the peak of the reopening-induced economic rebound now behind us and several regions having implemented second wave restrictions, we anticipate that real estate activity will increasingly soften as we enter the winter months. To contain the virus, CREA itself has advised against in-person open houses, which suggests more limited homebuying in the coming months. Still, highly accommodative borrowing rates and the extension of pandemic policy supports remain and may put a floor under the market. Ultimately, much will depend on the ability of governments, households, and firms to keep the pandemic’s secondary phase under control.
We continue to see some evidence that homebuyers are seeking out larger single-family housing units during the pandemic. This is demonstrated by the prevalence of outsized price gains in the segment, which suggest demand for more spacious accommodations as greater numbers of employees work remotely. Yet price appreciation remains present across unit types in most centres, suggesting strong demand across unit types.
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