January home sales in Canada fell from the same month last year, but the market still posted its second-best performance for the month, and the average price hit a new record high, the Canadian Real Estate Association (CREA).
Posted at 5:44 p.m.
The national average home price peaked at $748,450 last month, which was up 21% from the $618,587 price seen in January 2021.
Excluding the Greater Vancouver and Greater Toronto markets, two of the busiest and most expensive housing markets in the country, the average price of residential properties in Canada drops by more than $160,000, CREA said.
The seasonally adjusted average home price in both areas was over 1.2 million. Compared to December, it was up 1.8% in Greater Vancouver and 5.7% in Greater Toronto.
The MLS Home Price Index rose to $836,300 in January, posting a record 2.9% month-over-month increase.
Excluding the period when the country was emerging from the first wave of the pandemic, January’s monthly price rise was the fastest since 1989, Rishi Sondhi, an economist for TD Economics, said in a note to investors.
Actual sales in January were 33,166, down 10.7% from 37,137 transactions in January 2021 – their highest number for a month of January, ACI said.
On a seasonally adjusted basis, January home sales rose 1.0% from December to 55,043 from 54,482.
“The reality was that people weren’t ready to sell and there were very few offers in the market,” said Davelle Morrison, a Toronto-based broker with Bosley Real Estate.
“Now I have three entries for late February or early March, but for these people, January was just a little too early. »
A high demand problem
Real estate agents and economists attributed January’s second-best performance in a month and soaring prices to strong demand for homes from millennial buyers eager to own before prices spike more, newcomers showing up in the country after immigration has been halted during the pandemic, and investors eager to take advantage while interest rates are lower.
“It is difficult for supply to keep pace with such strong demand,” Sondhi said.
His remarks came as ACI noted a lack of new registrations. The latter fell by 11% to 61,602 in January, whereas they had been counted at 69,196 in December.
But economist Robert Kavcic, of BMO Capital Markets, argued that new listings had returned to a normal pace in the past year and that the boom in demand was what was causing an “extraordinary tightening” in the balance. market and inventory.
“As listings evaporate within days due to multiple offers, it’s a demand issue,” he wrote in a note to investors. “The anticipation of rising prices could even dampen listings and stimulate demand. »
Several real estate boards are forecasting lower, but sustained year-over-year price increases in 2022, as the extremely low interest rates seen during the COVID-19 pandemic are set to rise.
“Affordability is clearly deteriorating rapidly, which should make it harder for first-time homebuyers to get into the market,” Sondhi said.
The market tipped in favor of the sellers. ACI pointed out last month that a record 85% of local markets were made up of sellers’ markets, and it deemed the other 15% to be “balanced” regions.
These conditions, combined with the lack of new listings, drove prices up again.
“People can’t afford to go to the GTA,” Ms.me Morrison, noting that she has seen people head to New Brunswick or even the outskirts of the Greater Toronto Area, where housing is cheaper.
“As the saying goes, they’ll drive until they buy. »
Claire Fan, an economist at RBC Economics, noted that price increases were led by major markets like Toronto and Montreal, which both saw prices rise 3.5% from December.
“Growth has been slower in the Prairie provinces, but even there sellers are driving the majority of markets,” she wrote in a note to investors.
Butme Fan hopes the market will become less frantic.
She thinks that deteriorating affordability, rising borrowing costs and increased housing supply will gradually dampen demand and restore some balance.
Mr. Kavcic agrees.
“We have a fundamentally strong housing market, which has been allowed to overheat because of too lax policy,” he wrote.
“It will take higher interest rates to change the psychology of the market, calm excess demand and price growth. That day is fast approaching. »