Will 2020 Wind Up Being a Record Year for Canadian MLS® Home Sales?

On Monday, November 16, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of October. 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.

For anyone waiting for the existing Canadian housing market to begin to settle down following this summer’s surprisingly strong recovery, they’re going to have to wait a little longer.

Reports about the death of the Canadian housing market have been greatly exaggerated by the Housing Bears for my entire career. I think some are still banking on doom and gloom predictions made over a decade ago! Not that I would have thought it was going to be this strong either, certainly not back in April. And admittedly, it’s not exactly a bold annual call when we’re halfway through November. That said, here we are.

October was a record for nationwide home sales in that month by a margin of more than 14,000 transactions—that’s a lot. September was a record for sales in that month by almost 20,000 transactions—the equivalent of a normal month of September with an entire month of December tacked on. In July and August combined, more than 122,000 homes traded hands via Canadian MLS® Systems. The previous record summer was around 96,000 sales.

As we’ve moved through the last few months of headline-grabbing data, we’ve seen sales activity for the year-to-date not just catch up with last year, which was surprising enough, but at this point, activity in 2020 has a real shot at setting an annual record. What we’re seeing now is objectively over-and-above what would have been required to make up for a locked-down spring market this year.

So far this year, some 461,818 homes have traded hands over Canadian MLS® Systems, up 8.6% from the first 10 months of 2019. It was the second-highest January-October sales figure on record, trailing only 2016 and only by about 14,000 sales—a gap that could be closed by year-end if November and December continue to perform as the last four months have.

The deciding factor will be supply, particularly on the ground-level side of things. That’s because with market conditions the tightest they have ever been, demand is not measured by how many homes trade hands in our observed database, but rather by a more allusive number—the number of people or households out there trying to buy a home right now.

We don’t have a database to measure that, but we can say with certainty there are a lot of them, and demand can’t play out on the sales side because of that scarcity of listings is continuing to overflow onto the price side (see table below, especially the Ontario markets further out from the Greater Toronto Area). I’m sure many REALTORS® who have had to mediate multiple offer situations this year will attest to that.

The numbers this year are certainly surprising when many traditional drivers of the market, economic growth, employment, international immigration and confidence, in particular, are so weak. Something worth considering as it relates to the existing home market is how many households may be choosing to pull up stakes and move because of COVID-19 and all the associated changes to our lives? We could be seeing a lot of moves, or churn in the market, that would not have happened in a non-COVID-19 world. And unlike many first-time home buyers struggling against rising prices and the stress test, many of these existing owners are likely entering into the fray with considerable equity to play with, particularly if they’re moving out from the big centres.

What a weird year! I’ll be back with an update in December.