On Monday, the Canadian Real Estate Association (CREA) released its national housing statistics for the month of May—the second full month of the COVID-19 pandemic.
While restrictions have begun to lift in many parts of the country, much remains uncertain about the real estate industry. 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.
May was one of those “on the one hand … on the other hand” kind of months for housing data in Canada.
On the one hand, both sales and new listings were up on a seasonally adjusted basis in May compared to April—57% for sales and 69% for new listings—huge percentage increases, albeit from a very low starting point.
On the other hand, sales and new listings are still historically very low at this point.
To give you an idea of where sales are in level terms, if a normal solid year sees about 500,000 homes trade hands via MLS® Systems in Canada, the annualized pace of sales in April was only about 200,000, but May was almost 315,000.
So, the big picture for this data release is things are clearly moving in the right direction, probably faster than many of us would have guessed, but normal is still a ways away.
Interestingly, under the surface what those monthly numbers miss is this improving trend has been going on since mid-April and has continued right up through the first week of June. As such, we’re already closer (though not yet back) to normal than these monthly numbers suggest. The June numbers should show that.
Regionally, since we all reacted to the COVID-19 lockdowns in much the same way, these trends look similar everywhere. That is, a big drop off in sales and new listings in April and a partial rebound in May.
However, there are some notable regional differences.
Several places which saw smaller rebounds in May, also had much smaller declines in April. So, taken the size of the initial drop together with May’s rebound, a lot of the places with the less exciting looking numbers are a lot closer to being back to normal levels of activity than others. This is the case in Saskatchewan, Manitoba and New Brunswick.
Quebec is also doing relatively better, having seen a large decline in activity in April but also the largest rebound in May.
In contrast, British Columbia, Alberta and Ontario are currently the furthest below normal. To blame it all on demand may be putting the cart before the horse in this situation.
In some cases (particularly in Ontario), you must consider there may be supply side constraints pacing the sales rebound. Despite buyers being around and wanting to be active in the market, it might be taking a bit longer for those new listings to be made available for sale again. You can’t buy what isn’t available.
On the price side, the MLS® Home Price Index (HPI) was basically unchanged from April to May, with about half the markets covered seeing prices firm up. This is in line with sale-to-list price ratios which have also been rising again over the last month or so in many parts of the country.
Looking at prices across the country, since the COVID-19 crisis began small declines in prices have been seen in British Columbia while declining trends already in place in Alberta have accelerated a bit.
Further east across the Prairies, where sales have been doing comparatively much better against history than in much of the country, price trends have been stabilizing.
The Greater Golden Horseshoe in Ontario has generally seen its pre-COVID-19 rapidly accelerating prices put into a stall for now, although some of those markets are looking like they’re ready to pick up again.
And even further east in Ottawa, Montreal and Moncton, prices appear to have been able to continue climbing, albeit at a slower pace than before.
The overall MLS® HPI is still up 5.3% year-over-year.
The national average home price has admittedly taken a bit of a hit in the last two months, but for the most part that’s likely because the higher end of the market is currently less active. As of May 2020, the national share of home sales made up by British Columbia and Ontario (the two most expensive provinces by far) hit its lowest level on record. The national average price should recover as these parts of the sales sample return to more normal levels of activity.