Click here for the full article by Dr Sherry Cooper, Chief Economist at Dominion Lending Centres.
Today the Canadian Real Estate Association (CREA) released statistics showing national home sales hit another all-time high in February 2021. Canadian home sales increased a whopping 6.6% month-on-month (m-o-m), building on the largest winter housing boom in history. On a year-over-year (y-o-y) basis, existing home sales surged an amazing 39.2%. As the chart below shows, February’s activity blew out all previous records for the month.
The seasonally adjusted activity was running at an annualized pace of 783,636 units in February. CREA’s revised forecast for 2021 is in the neighbourhood of 700,000 home sales. Strong demand notwithstanding, sales may be hard-pressed to maintain current activity levels in the traditionally busier spring months absent a surge of much-needed new supply. However, that could materialize as current COVID restrictions are increasingly eased and the weather starts to improve.
The month-over-month increase in national sales activity from January to February was led by the Greater Toronto Area (GTA) and several other Ontario markets, along with Calgary and some markets in B.C. These offset a considerable decline in Montreal’s sales, where new listings have started 2021 at lower levels compared to those recorded in the second half of last year.
In line with heightened activity since last summer, it was a new record for February by a considerable margin (over 13,000 transactions). For the eighth straight month, sales activity was up in the vast majority of Canadian housing markets compared to the same month the previous year. Among the eight markets that posted year-over-year sales declines in February, minimal supply at the moment is the most likely explanation.
“We are right at the start of the first undisturbed (by policy or lockdown) spring housing market in years, and we also have the most extreme demand-supply imbalance ever by a large margin. So, the question is, what is going on? I think part of it is the demand that built up due to regulatory changes in the years leading up to COVID that is playing out now. Part of it is the demand that is being pulled forward from the future either in search of a home base to ride out the pandemic or to lock down a purchase amid rapidly rising prices while securing a record low mortgage rate,” said Shaun Cathcart, CREA’s Senior Economist. “But maybe the biggest factor here is the emergence of existing owners with major equity, prompted by the great shake-up that is COVID-19 to pull up stakes and move. First-time buyers, which we have a lot of, are now having to compete with that as well.”