A new report from the Canadian Real Estate Association (CREA) shows 666,995 homes were sold last year via Canadian MLS Systems, far and away a new record by a large margin.
That’s great for sellers, realtors, mortgage brokers, moving companies — it’s a long list.
Buyers looking for homes are not on the roll.
According to CREA, the supply of homes listed for sale at the end of December was at an all-time low, with only 1.6 months of supply on a national basis. That means at the current rate of sales, all resale homes listed in Canada would be sold in 1.6 months.
With sales little changed and new listings down in December, the sales-to-new listings ratio tightened to 79.7% compared to 77% in November. The long-term average for the national sales-to-new listings ratio is 54.9%.
Five months of supply is considered a comfortable average.
To be clear, the only place a Canadian housing market exists is in the vault at the Bank of Canada. Every market differs from the others in terms of listings, sales, pricing, etc.
The number of newly listed homes decreased 3.2% in December from November, with declines in Greater Vancouver, Montreal and a number of other areas in Quebec more than offsetting an increase in new supply in the Greater Toronto Area.
“With the housing supply issues facing the country having only gotten worse to start 2022, take any decline in sales early in the year with a grain of salt because the demand hasn’t gone away, there just won’t be much to buy until a little later in this spring,” says Cliff Stevenson, chair of CREA. “But when those listings eventually start to show up, the spring market this year will almost certainly be another headline grabber.”
Affordability is at risk, says CREA’s senior economist, Shaun Cathcart.
“Unfortunately, the housing affordability problem facing the country is likely to get worse before it gets better,” says Cathcart. “Policymakers are starting to say the right things, but now they have to act to change this course we’re on. An aggressive national push to build more homes is what will address the issue, but it will probably have to be a greater amount of building than anything we’ve ever undertaken.”
A Canadian Home Builders’ Association (CHBA) report says supply chain issues are challenging builders’ abilities to re-supply the market.
“These supply chain issues are directly impacting industry and, in turn, home buyers” says the report. “More than 55% of panelists (assembled by CHBA) said supply chain issues are delaying some pre-sales and/or development due to price volatility. Furthermore, continued high lumber costs combined with overall construction cost increases are adding over $57,000 on a 2,374 sq. ft. home.”
A lack of available labour is adding to the challenge.
“Difficulty in finding skilled trades professionals is contributing to delays, and the cost to employ those workers has risen on average 19% since before the pandemic, which is also contributing to overall construction cost increases,” says the report. “Canada is experiencing a skilled trades shortage that is predicted to get worse. BuildForce Canada calculates an additional 131,000 professionals will retire from the residential construction industry over the next decade, creating even more demand.”
All levels of government, despite what they may say, have impeded builders’ abilities to restock markets, says David Langlois, 2021 president of the Victoria Real Estate Board.
“The situation we are now in is because of the deficit of supply that has compounded over the past decades of hesitation around growth. However, governments at the federal and provincial level have instead chosen to focus elsewhere and invest their time re-inventing the process of how homes are sold in Canada by creating new rules which include the introduction of a ‘cooling-off’ period,” says Langlois. “These measures will do nothing to improve our market, nor will they increase consumer protection. The process of how a home is sold is not the issue — homes will sell for what consumers will pay for them — using any sales process.
“The issue is how homes are brought to the marketplace and our huge lack of supply. Governments should expend their resources to address supply issues that continue to drive up competition for homes and result in ever increasing prices.”
In her 2021 Economic and Fiscal Update in December, Canada’s Finance Minister and Deputy Prime Minister Chrystia Freeland said there’s no quick fix in sight and it will take years to fix.
Given the way most governments wrap builders and developers in red tape, ‘take years to fix’ is code for never.
Myke Thomas is a Western Standard contributor. He started in radio as a child voice actor, also working in television and as the real estate columnist, reporter and editor at the Calgary Sun for 22 years.