On Tuesday, March 15, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of February. Below, CREA’s Senior Economist Shaun Cathcart provides an update on the current state of housing markets in Canada and explains what the data means for members.
A pattern we’ve observed the last couple of years has been an increase in the degree of certain seasonal elements in housing markets—in other words, common seasonal ups and downs are becoming more intense.
One example is the way in which new listings tend to dry up in December and January, before re-appearing in early spring.
In a more balanced market, there would be plenty of listings still hanging around through December and January for buyers to shop, should they feel like braving the weather. But in a market like we have today with so little end-of-month inventory, everything seems to go extra quiet over the winter as buyers await the spring listings.
That happened again to start 2022, with new listings, even on a seasonally adjusted basis, dropping sharply in January before exploding back onto the scene in February.
In fact, if you disregard May and June of 2020 when the market was just starting back up from the initial COVID-19 lockdowns as an aberration, then the February 2022 month-over-month increase in new listings would be the largest ever. That’s good news for a market starved for supply, even if at this point it’s only one month.
That increase in badly needed new supply has so far led to a 4.6% month-over-month increase in sales for February, which is nothing to sneer at, but you might be inclined to wonder if that means they aren’t all selling. I’ve read that.
However, there’s a more likely explanation for this. If you think about how January is one of slowest months of the year for housing activity, and how March is one of the busiest, then that makes February the transitional month between those two extremes.
With activity in the market rising very sharply through the month of February, most of those new listings would have turned up nearer the end of the month. As such, a great many of those likely had an offer date that was into March, hence why they would not show up in the February sales numbers.
That bodes well for March sales, although daily data suggests this could be somewhat offset by the fact that people actually seem to have taken a March break for the first time in two years.
Seasonal ups and down in sales and new listings notwithstanding, the more important thing for understanding the state of the market is the balance between supply and demand.
At the national level, the market has been stuck at a record-low 1.6 months of inventory since New Year’s Day. I suppose if you were inclined to look for a silver lining, it would be that at least it hasn’t fallen any lower in the last three months.
As we have said before, along with what are still the tightest market conditions ever, you might expect to get the biggest price gains ever, and that was again the case in February 2022.
The Aggregate Composite MLS® Home Price Index was up a record 3.5% on a month-over-month basis in February 2022 and by a record 29.2% on a year-over-year basis.
Regionally, year-over-year gains remain about on par with the national figure in British Columbia, only a little lower than that in Quebec and Prince Edward Island, lower still in the Prairies and Newfoundland and Labrador, and were even stronger than the national increase in Ontario, New Brunswick and Nova Scotia.
In short, we haven’t turned a corner yet. Ideally, new listings will continue to come out in big numbers in the months ahead. Combined with higher interest rates and higher prices, it could mean a turning point where price growth begins to slow down and inventories finally begin to recover.
But recall, it has taken seven years of declines for inventories to fall from the record-high 250,000 range back in 2015 to the record-low 90,000 range where they are today. At today’s rate of sales activity, to get us back to a balanced national market those inventories would not just have to get back to 2015 levels, they would have to get up into the 300,000 range, and we’re talking about a slow-moving stock variable here.
So, even if the market started to fix itself tomorrow, we’re looking at a very long road back to Goldilocks “not too hot, not too cold” territory. The faster way to start to turn this market back towards balance and keep it there long-term is to start building a record number of new homes across the spectrum.
Want to learn more? Head on over to creastats.ca.
