Home Prices Up 17% in September, But Some Signs of Cooling Emerge
The average home price in Canada surpassed $600,000 for the first time ever in September and home sales jumped nearly 46% compared to a year ago.
But, beneath the headline-grabbing details from the Canadian Real Estate Association’s latest housing report, there were some underlying signs of cooling.
But first, here’s a rundown of September’s stats:
MLS home sales: Up 45.6% year-over-year
Average national sale price: $604,000, up 17.5% from a year ago
Removing the high-priced markets of the Greater Toronto and Vancouver areas, the average sale price was $479,000, still up by more than 20%
Months of housing inventory: 2.6 months
This is how long it would take to liquidate current inventories at the current sales rate.
This is unchanged from August, and a record low
“This is starting to sound like a broken record (about records being broken), but Canadian home sales and prices set records once again in September amid record-tight overall market conditions, as they did in July and August,” Shaun Cathcart, CREA’s senior economist, said in a release. “Reasons have been cited for this – pent-up demand from the lockdowns, Government support to date, ultra-low interest rates, and the composition of job losses to name a few.”
Cathcart noted that records were in the process of being broken at the start of the year, pre-COVID, due to record-tight overall market conditions.
“But I think another wildcard factor to consider, which has no historical precedent, is the value of one’s home during this time,” Cathcart added. “Home has been our workplace, our kids’ schools, the gym, the park and more. Personal space is more important than ever.”
Here’s a look at how some regional and local housing markets performed in September:
New Brunswick: $226,659 (+31.4%)
Ottawa: $529,900 (+22%)
Halifax: $381,792 (+19%)
Greater Montreal Area: $413,000 (+15.5%)
Greater Toronto Area: $897,700 (+11.6%)
Winnipeg: $286,600 (+7.1)
Greater Vancouver Area: $1,041,300 (+5.8%)
Victoria: $716,800 (+3.3%)
Calgary: $415,200 (-0.3%)
Signs of Cooling
Despite the headline-grabbing results, there were some segments of the market where growth was more muted.
Newly listed homes were down 10.2%, reversing the rise to record levels in August. CREA reported that new supply of homes was down in two-thirds of local markets, led by declines in the Greater GTA and GVA markets.
The single-detached home segment continued to show the most strength, with the Home Price Index showing a 12% year-over-year gain. Condo gains, on the other hand, rose by about half, 6.2%. Condo prices have mostly flattened in the Toronto, Vancouver and Hamilton markets to pre-pandemic levels, CREA added.
Reaction to September’s Housing Market
Many analysts, who had initially forecast a cooling of the housing market by now, continue to call for a slowdown in activity in the coming quarters.
“Several factors explain the stunning strength in sales observed in recent months, including low borrowing costs, the relative mix of employment/income losses, and the release of pent-up demand after a muted spring selling season,” noted TD economist Rishi Sondhi.
“The question now becomes whether this momentum is sustainable. In our view, home sales are set to cool from their unsustainable third-quarter pace over the next few quarters.”
RBC’s Robert Hogue suggested that the coming months will provide more clarity as to the market’s direction in the year ahead.
“We’ll see whether low interest rates and changing housing needs can keep demand boiling hot, or whether the exhaustion of pent-up demand and plummeting immigration will cool things down,” he wrote. “We’ll also learn how many current homeowners will be in trouble once mortgage payment deferrals expire and are forced to sell.”
BMO’s chief economist Douglas Porter agrees that a cool-down is in the cards, despite the persistent strength the market has displayed to date.
“As one outfit put it, not even a global pandemic managed to knock the Canadian housing market off its game, and it’s doubtful that even a serious second wave would have much more impact,” he wrote. “Still, we doubt that this recent sizzling strength can persist amid some of the building headwinds, which should at least somewhat tame market conditions in the months ahead. The underlying economic conditions simply do not support such a piping hot market over a sustained period.”