Despite a global pandemic that ravaged the Canadian economy early in the year, the housing market came back with a roar and ended the year by shattering records in December.

The average home sale price in the month rose to $607,280, up 17.1% compared to December 2019, the Canadian Real Estate Association (CREA) reported on Friday. Removing the two highest-priced markets of Toronto and Vancouver, the national average price was $477,280, up nearly 19%.

Home sales, meanwhile, were up 47.2% year-over-year.

“It’s official, despite all the challenges, 2020 was a record year for Canadian resale housing activity,” Costa Poulopoulos, Chair of CREA, said in a release.

But there’s more.

Both the total volume and value of homes sold over the course of 2020 reached record highs, with the latter up 27% year-over-year. That’s the biggest annual jump since 1988, a time when Canada’s housing market and economy were in a “full-on boom, and the Bank of Canada was beginning an aggressive tightening campaign,” noted BMO Chief Economist Douglas Porter.

“This sweeping strength in sales heavily suggests that what’s driving this market are broad overall factors and not local economic factors,” he added. “Specifically, the plunge in interest rates last year and the pandemic-driven move to upgrade have lifted all markets.”

Porter also made the following observation with Canada’s average house price north of $600,000: “In contrast, the average home price in the U.S. in November was US$343,000 (or just under C$440,000 at today’s exchange rate). In other words, average home prices are almost 40% higher in Canada than the U.S., adjusted for the currency.”

However, the growth hasn’t been uniform across the country, with certain markets in B.C. and the Prairies posting much more modest gains.

Here’s a look at some regional and local housing market results from December:

• Ontario: $751,508 (+20.1%)
• Quebec: $401,010 (+18.8%)
• B.C.: $843,819 (+12%)
• Alberta: $394,652 (+2.9%)
  
• Saskatchewan: $275,066 (+1.7%) 
• Woodstock-Ingersoll, ON: $484,300 (+31.6%)
• Quinte & District, ON: $412,600 (+31.3%)
• Barrie & District: $613,200 (+23.3%)
• Ottawa: $545,500 (+22.3%)
• Halifax-Dartmouth: $397,378 (+19.4%)
• Greater Montreal Area: $426,500 (+18.2%)
• Greater Toronto Area: $909,500 (+11%)
• Winnipeg: $285,800 (+7.6)
• Victoria: $736,400 (+5.7%)
• St. John’s: $268,200 (5.7%)
• Greater Vancouver Area: $1,047,400 (+5.4%)
• Edmonton: $321,500 (2.7%)
• Calgary: $418,400 (+1.5%)

The national sales-to-new listings tightened to 77.4%, which is among the highest level on record for this measure. That compares to a long-term average of 54.2%, CREA said.

Canada’s housing market remains under pressure largely due to dwindling housing supply. In December, inventory fell to a fresh record-low of 2.1 months, meaning this is how long it would take to liquidate current inventories at the current sales rate. CREA noted that 29 Ontario markets were under one month of inventory, up from 21 markets in November.

How High Can it Go?

The country’s housing market has already reached unbelievable heights in a year that was initially forecast to see home prices fall by double digits. The big question now remains, how much higher will it go in 2021?

“We see little that will stop activity or prices from reaching new highs in 2021,” writes RBC’s Robert Hogue. “Historically low interest rates, changing housing needs, high household savings and improving consumer confidence will keep demand supercharged. A dearth of supply will maintain the heat on prices. That said, we expect the market to cool gradually over the course of 2021.”

CREA’s senior economist Shaun Catchart said what happens in 2021 will largely be dependent on how much housing supply becomes available.

“The stat to watch in 2021 will be new listings, particularly in the spring – how many existing owners will put their homes up for sale?” he wrote. “Ideally we’d like for households to be able to find and acquire the homes that best suit their needs and for housing to remain affordable, but the fact is we’re facing a major supply problem in 2021.”

On the topic of low interest rates, which are currently making higher-priced homes more affordable than they otherwise would be, BMO’s Porter said he doesn’t expect the Bank of Canada will get the urge to tighten its policy in response to this housing boom, for several reasons.

“First, policy-makers are probably welcoming any growth at this point, no matter its source. Second, in earlier speeches the Bank has indicated that the onus will be on regulatory (or macroprudential) measures to rein in housing, not interest rates,” Porter wrote. “In fact, financial markets and the Bank are openly musing about the possibility of micro rate cuts (i.e., a 15-bp shave)—largely in response to the strength in the Canadian dollar—and certainly not rate hikes at this point.”

Finally, we’ll leave you with this aggressive prediction tweeted today by real estate commentator Ben Rabidoux of North Cove Advisors: