Housing resale market sets record gain in January: CREA

OTTAWA – Statistics released by the Canadian Real Estate Association (CREA) show national home sales through its Multiple Listing System (MLS) set another all-time record in January 2021 although the number of new listings fell dramatically and average prices posted double digit gains.

The realtors group reported national home sales rose 2% on a month-over-month basis while new listing fell 13.3% from December 2020 to January 2021.

CREA also reported that on a seasonally adjusted basis, sales were running at an annualized pace of 736,452 units in January, significantly above CREA’s current 2021 forecast for 583,635 home sales this year. “Sales will be hard pressed to maintain current activity levels in the busier months to come absent a surge of much-needed new supply; although, that could materialize as current COVID-19 restrictions are increasingly eased and the weather starts to improve,” the association said.

The month-over-month increase in national sales was led by a mixed bag of gains under the surface, including in Edmonton, the Greater Toronto Area (GTA), Chilliwack B.C., Calgary, Montreal and Winnipeg. There was more of a pattern to the declines in January. Many of those were in Ontario markets, following predictions that sales in that part of the country might dip to start the year with so little inventory currently available and many of this year's sellers likely to remain on the sidelines until spring.

Actual sales posted a 35.2% gain in January 2021 over January 2020 – reaching a new monthly record by a considerable margin. For the seventh straight month, sales were up in almost all Canadian housing markets when compared to the same month last year. Among the 11 markets posting year-over-year declines, nine were in Ontario where supply is extremely limited at the moment.

“2021 started off just like 2020 ended, with a number of key housing market indicators continuing to set records,” CREA chairman Costa Poulopoulos said in a statement. “The two big challenges facing housing markets this year are the same ones we were facing last year – COVID and a lack of supply.

“It’s looking like our collective efforts to bring those COVID cases down over the last month and a half are working,” he continued, adding, “With luck, some potential sellers who balked at wading into the market last year will feel more comfortable listing this year.”

“The problem with this time of year is that the buyers and sellers that will in time define the Canadian housing story of 2021 are mostly all still waiting in the wings,” CREA senior economist Shaun Cathcart observed. “It’s the dead of winter and we’re only just starting to get the second wave of COVID under control. We’re unlikely to see a rush of listings until the weather and public heath situations improve, and we won’t see buyers until those homes come up for sale.

"The best-case scenario would be if we see a lot of sellers who were gun-shy to engage in the market last year making a move this year. A big surge in supply is what so many markets really need this year to get people into the homes they want, and to keep prices from accelerating any more than they already are,” he added.

The number of newly listed homes dropped by 13.3% in January, led by double-digit declines in the GTA, Hamilton-Burlington, London and St. Thomas, Ottawa, Montreal, Quebec and Halifax Dartmouth.

There were only 1.9 months of inventory on a national basis at the end of January 2021 – the lowest reading on record for this measure. At the local market level, some 35 Ontario markets were under one month of inventory at the end of January.

The actual national average home price was a record $621,525 in January 2021, up 22.8% from the same month last year.

Excluding this country’s two largest and most expensive markets – the Greater Vancouver Area and the GTA – cuts $129,000 from the national average price.

“Home sales picked up right where they left off to start 2021,” Rishi Sondhi of TD Economics said in her research note. “Demand was likely given a lift by ultra-low mortgage rates, which dropped again during the month. January’s robust gain coupled with a strong handoff into this year virtually ensures that sales will increase in the first quarter.

“However,” she continued, “with sales likely running above fundamentally supported levels, we think some cooling in activity will take place, especially in the second half. A dwindling supply of inventories, when benchmarked against the current sales pace, could also weigh on activity moving forward.”

Sondhi noted that with CREA’s data showing a solid gain in prices last month and new supply collapsing across nearly the entire country, markets are historically tight, pointing to further strong price gains ahead in the near-term.

---