The Canadian Real Estate Association (CREA) reports home sales across the country increased 1.4% in March from February, with total sales last month comparable to March 2019..That’s not necessarily a signal the pandemic-influenced housing frenzy has finally run its course, says Jill Oudil, chair of CREA..“As the spring market heats up and it looks as though some buyers are coming off the sidelines, it’s important to remember that the intense market conditions of recent years have not gone anywhere, they’ve just been on pause,” says Oudil..“With buyers re-entering a market with historically low supply, homes are not only selling but selling faster.”.Nationally, prices increased month-over-month for the first time in more than a year across Canada. Higher sales and moderate price increases are good signs, says RBC economist Robert Hogue, but something is missing..“Sellers have yet to come out of hibernation,” says Hogue. “New listings are still trending lower, falling in four of the past five months.”.“In fact, Canada’s housing market could be potentially busier at this stage were there more homes for sale. Back-to-back drops in inventories have tightened demand-supply conditions, pitting more buyers against each other in bidding contests in parts of the country, such as Toronto and Vancouver.”.“The supply issue is still with us, with new listings at 20-year lows,” says Shaun Cathcart, CREA’s senior economist. “The number of newly listed homes dropped a further 5.8% on a month-over-month basis in March. With new listings falling considerably and sales moving higher once again in March, the sales-to-new listings ratio jumped up to 63.5%, the tightest market in a year.” .“The long-term average for this measure is 55.1%. There were 3.9 months of inventory on a national basis at the end of March 2023, down from 4.1 months at the end of February and the lowest level since last October. It’s also now more than a full month below its long-term average.”.BMO senior economist Robert Kavcic says sellers are reluctant to get into the market for several reasons..“Potential sellers don't want to sell in a downmarket and this time they don't have to, thanks to a strong job market and limited mortgage delinquencies,” says Kavcic..“Banks are giving homeowners on variable-rate mortgages a buffer by stretching out amortizations instead of hiking payments as rates have risen from below 2% to above 6%.”.Other factors are in play, says Kavcic..“The Office of the Superintendent of Financial Institutions made sure most buyers were stress tested. Even those who took out mortgages at 1.5% had to prove they could handle rates in the 4.75% to 5.25% range or higher,” he says. “A strong rental market is making it worthwhile for investors to hang in there, even as cash flow worsens. Swallow a capital loss or hang on? Many seem to be hanging on." .With an increased appetite for buying, sellers are watching market conditions to become even more in their favour, says Hogue..“It’s hard to know when would-be sellers will be ready to take the plunge. Growing evidence of a market inflection point this spring, and stabilizing prices, might do the trick in the coming months,” he says. “Of course, the longer sellers hold back, or the more they retrench, the tighter demand-supply conditions are likely to get and quicker upward price pressures are likely to build.”.Set to exacerbate the supply issue are shifting populations and growth. .“Booming immigration will fuel demand through the medium term and possibly beyond, raising the odds of deep supply shortages in the future if homebuilding fails to pick up materially,” says Hogue..So, while there are some green shoots in spring housing markets, Hogue says volatility will remain part of the mix through the course of 2023..“We expect diverging trends to persist in the near term. It’s likely to take a little longer in many markets for demand-supply conditions to firm up sufficiently to stabilize prices.” .“Reaching the cyclical bottom doesn’t mean activity and prices are about to rebound sharply immediately thereafter, in fact, we see the recovery phase starting slowly later this year as affordability issues and a weaker economy continue to hold back buyers.”.“The pace should progressively pick up in 2024 once the economy clears its soft patch, inflation returns to target and the Bank of Canada reverses part of the massive rate increases it’s imposed since March 2022.”
The Canadian Real Estate Association (CREA) reports home sales across the country increased 1.4% in March from February, with total sales last month comparable to March 2019..That’s not necessarily a signal the pandemic-influenced housing frenzy has finally run its course, says Jill Oudil, chair of CREA..“As the spring market heats up and it looks as though some buyers are coming off the sidelines, it’s important to remember that the intense market conditions of recent years have not gone anywhere, they’ve just been on pause,” says Oudil..“With buyers re-entering a market with historically low supply, homes are not only selling but selling faster.”.Nationally, prices increased month-over-month for the first time in more than a year across Canada. Higher sales and moderate price increases are good signs, says RBC economist Robert Hogue, but something is missing..“Sellers have yet to come out of hibernation,” says Hogue. “New listings are still trending lower, falling in four of the past five months.”.“In fact, Canada’s housing market could be potentially busier at this stage were there more homes for sale. Back-to-back drops in inventories have tightened demand-supply conditions, pitting more buyers against each other in bidding contests in parts of the country, such as Toronto and Vancouver.”.“The supply issue is still with us, with new listings at 20-year lows,” says Shaun Cathcart, CREA’s senior economist. “The number of newly listed homes dropped a further 5.8% on a month-over-month basis in March. With new listings falling considerably and sales moving higher once again in March, the sales-to-new listings ratio jumped up to 63.5%, the tightest market in a year.” .“The long-term average for this measure is 55.1%. There were 3.9 months of inventory on a national basis at the end of March 2023, down from 4.1 months at the end of February and the lowest level since last October. It’s also now more than a full month below its long-term average.”.BMO senior economist Robert Kavcic says sellers are reluctant to get into the market for several reasons..“Potential sellers don't want to sell in a downmarket and this time they don't have to, thanks to a strong job market and limited mortgage delinquencies,” says Kavcic..“Banks are giving homeowners on variable-rate mortgages a buffer by stretching out amortizations instead of hiking payments as rates have risen from below 2% to above 6%.”.Other factors are in play, says Kavcic..“The Office of the Superintendent of Financial Institutions made sure most buyers were stress tested. Even those who took out mortgages at 1.5% had to prove they could handle rates in the 4.75% to 5.25% range or higher,” he says. “A strong rental market is making it worthwhile for investors to hang in there, even as cash flow worsens. Swallow a capital loss or hang on? Many seem to be hanging on." .With an increased appetite for buying, sellers are watching market conditions to become even more in their favour, says Hogue..“It’s hard to know when would-be sellers will be ready to take the plunge. Growing evidence of a market inflection point this spring, and stabilizing prices, might do the trick in the coming months,” he says. “Of course, the longer sellers hold back, or the more they retrench, the tighter demand-supply conditions are likely to get and quicker upward price pressures are likely to build.”.Set to exacerbate the supply issue are shifting populations and growth. .“Booming immigration will fuel demand through the medium term and possibly beyond, raising the odds of deep supply shortages in the future if homebuilding fails to pick up materially,” says Hogue..So, while there are some green shoots in spring housing markets, Hogue says volatility will remain part of the mix through the course of 2023..“We expect diverging trends to persist in the near term. It’s likely to take a little longer in many markets for demand-supply conditions to firm up sufficiently to stabilize prices.” .“Reaching the cyclical bottom doesn’t mean activity and prices are about to rebound sharply immediately thereafter, in fact, we see the recovery phase starting slowly later this year as affordability issues and a weaker economy continue to hold back buyers.”.“The pace should progressively pick up in 2024 once the economy clears its soft patch, inflation returns to target and the Bank of Canada reverses part of the massive rate increases it’s imposed since March 2022.”
