Home Prices Rose to a Record High in November

General Beata Wojtalik 17 Dec

Home Prices Rose to a Record High in November

The average price of a home in Canada reached a new all-time high in November as inventory levels remain near record lows.

The average selling price in November was $720,854, up 19.6% year-over-year on an unadjusted basis, according to the Canadian Real Estate Association’s latest monthly report. The MLS Home Price Index, which takes out some of the volatility from the monthly figures, was up 2.7% on a monthly basis and a record 25.3% from a year ago.

Removing the high-priced markets of the Greater Toronto and Vancouver areas, the average price stands at $562,850, up 17% year-over-year.

There were 54,222 home sales in November up 32.1% from a year earlier, but down 1.6% on a monthly basis.

“Even at what is traditionally the slow time of year for housing, conditions and price trends are at the same record levels we saw this spring,” noted CREA chair Cliff Stevenson. “Things may calm down a bit through the balance of December and January, but next year’s spring market will no doubt be an interesting one.”

Near record-low housing inventory continues to be a major factor keeping prices higher. In November, there were just 1.9 months of inventory available, unchanged from October and well below the long-term average of five months. One positive, however, was the fact new listings were up 3.3% from October, which helped ease the sales-to-new listings ratio slightly to 77% from 79.1%.

 

Cross-Country Roundup of Home Prices

In just the past month, existing homeowners in some markets have seen the value of their homes rise by tens of thousands of dollars. Compared to October, average prices are up nearly $23,000 in Barrie and District, $29,613 in B.C., and over $44,000 in the Greater Toronto Area.

Here’s a look at some more regional and local housing market results for November:

  • Ontario: $922,580 (+23.9%)
  • Quebec: $471,195 (+14.1)
  • B.C.: $992,844 (+21.9%)
  • Alberta: $429,543 (+6.4%)
  • Barrie & District: $809,400 (+36.8%)
  • Halifax-Dartmouth: $488,382 (+24%)
  • Victoria: $884,700 (+22.4%)
  • Greater Montreal Area: $512,400 (+20.8%)
  • Greater Toronto Area: $1,172,900 (+28.3%)
  • Ottawa: $651,200 (+16.6%)
  • Greater Vancouver Area: $1,211,200 (+16%)
  • Winnipeg: $323,100 (+12.8%)
  • St. John’s: $289,400 (+7.2%)
  • Calgary: $446,300 (+9.3%)
  • Edmonton: $337,100 (+4%)

2022 Outlook for Home Prices

Record low housing supply, which is at least partly to blame for rising prices, will continue to pose an affordability challenge for new buyers in 2022, CREA noted.

“The fact is that the supply issues we faced going into 2020, which became much worse heading into 2021, are even tighter as we move into 2022,” wrote Shaun Cathcart, CREA’s senior economist.

“Interest rate hikes will make it even harder for new entrants to break into the market next year, even though activity may remain robust as existing owners continue to move around in response to all of the changes to our lives since COVID showed up on the scene,” he added. “As such, the issue of inequality in the housing space will remain top of mind.”

Some analysts continue to believe part of the renewed market “vigour” will be temporary, caused as buyers rush to make their purchase ahead of looming rate hikes.

“We believe many buyers are rushing in before higher rates take purchasing budget room away from them,” wrote RBC economist Josh Nye, adding that this trend could have a little longer to run, potentially into the first few months of the new year.

“We still think, though, that rapidly deteriorating affordability and easing pandemic restrictions will gradually cool demand and moderate price growth over the course of the coming year,” he added.

TD Bank economist Rishi Sondhi agrees, saying home sales will likely drop in the first half  of 2022 as the “pull-forward effect” unwinds and higher rising interest rates start to weigh on activity.

“However, a solid macro backdrop, favourable demographic trends, elevated household savings rates, and improving population growth should keep sales above their pre-pandemic levels,” he wrote. “This view is not without risks however, as investors have comprised a rising share of the market, thus potentially making sales more sensitive to rising interest rates.”

Steve Huebl

Bank of Canada Leaves Expectations For 2022 Rate Hikes Intact

General Beata Wojtalik 8 Dec

Bank of Canada Leaves Expectations For 2022 Rate Hikes Intact

The Bank of Canada decided to keep its target for the overnight rate at 0.25%, in line with forecasts and to maintain its forward guidance, which sees a rise in the overnight rate sometime in the middle quarters of 2022. Until then, policymakers vowed to provide an adequate degree of monetary stimulus to support Canada’s economy and achieve the inflation target of 2%. On the price front, the ongoing supply disruptions continue to support high inflation rates, but gasoline prices, which have been a significant upside risk factor, have recently declined. Still, the BoC expects inflation to remain elevated in the first half of 2022 and ease towards 2% in the second half of the year. Finally, recent economic indicators suggested the economy had considerable momentum in Q4, namely in the labour and housing markets. Still, the omicron variant of the coronavirus and the devastation left by the floods in British Columbia has added to downside risks.

The Bank’s press release went on to say, “The Governing Council judges that in view of ongoing excess capacity, the economy continues to require considerable monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved. In the Bank’s October projection, this happens sometime in the middle quarters of 2022. We will provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation target.”

In October, the Bank ended its bond-buying program and is now in its reinvestment stage. It maintains its Government of Canada bonds holdings by replacing securities as they mature.

Bottom Line

Traders continue to bet that the Bank of Canada will hike interest rates by 25 basis points five times next year. This would take the overnight rate from 0.25% to 1.5%. I think this might be overly hawkish, expecting a more cautious stance of three rate hikes next year to a year-end level of 1.0%. This expectation has already had an impact on economic activity. According to local real estate boards reporting in the past week, November home sales were boosted by buyers hoping to lock in mortgage rates before they rise further next year.

 

Dr. Sherry Cooper

Housing Demand Surges as Buyers Take Advantage of Low Rates While They Last

General Beata Wojtalik 8 Dec

Housing Demand Surges as Buyers Take Advantage of Low Rates While They Last

Canada’s largest markets saw a surge in homebuying demand in November, driven in part by buyers trying to secure mortgages before next year’s expected interest rate hikes.

That’s keeping upward pressure on home prices, according to the latest monthly reports from some of the key regional real estate boards.

Anticipated Bank of Canada rate hikes in 2022 are creating a “sense of urgency” for buyers, says Ann-Marie Lurie, chief economist for the Calgary Real Estate Board. In Calgary, sales are up over 46% from a year ago, but new listings haven’t been able to keep up.

It’s a similar story on the West Coast, according to the Real Estate Board of Greater Vancouver (REBGV).

“The imbalance between supply and demand, coupled with some buyers wanting to use rate holds on lower rate fixed-term mortgages, is keeping upward pressure on home prices in this traditionally quieter time of year for the market,” said Keith Stewart, an economist with REBGV.

Housing inventory continued to dry up in November as new listings fell in most major markets on both a monthly and annual basis. In Ottawa, for example, new listings are down by 27% from October.

Here’s a look at November readings from some of the country’s regional real estate boards:

Greater Toronto Area

Sales: 9,017

  • +3.3% Year-over-year (YoY)
  • -8% Month-over-month (MoM)

Average Price: $1,163,323

  • +21.7% (YoY)
  • +0.7% (MoM)

New Listings: 10,036

  • -13.2% (YoY)
  • -14.5% (MoM)

“A key difference this year compared to last year, is how the condo segment continues to tighten and experience an acceleration in price growth, particularly in suburban areas. This speaks to the broadening of economic recovery, with first-time buyers moving back into the market in a big way this year. The condo and townhouse segments, with lower price points on average, will remain popular as population growth picks up over the next two years,” said TRREB Chief Market Analyst Jason Mercer.

Source: Toronto Regional Real Estate Board (TRREB)

Greater Vancouver Area

Sales: 3,428

  • +11.9% YoY
  • -1.8% MoM

Sales are 33.6% above the 10-year average for November.

MLS Home Price Index for all property types: $1,211,200

  • +16% YoY
  • +1% MoM

New Listings: 3,964

  • -2.6% YoY
  • -2.1% MoM

“We expect home sale totals to end the year at or near an all-time record in our region. We’ve had elevated home sale activity throughout 2021 despite persistently low levels of homes available for sale,” said REBGV economist Keith Stewart. “With a new year around the corner, it’s critical that this supply crunch remains the focus for addressing the housing affordability challenges in our region.”

Source: Real Estate Board of Greater Vancouver (REBGV)

Montreal Census Metropolitan Area

Sales: 4,402

  • -17% YoY
  • +1.9% MoM

Median Price (single-family detached): $525,000

  • +21% YoY
  • +1.9% MoM

Average Price (condo): $374,000

  • +18% YoY
  • -1.3% MoM

New Listings: 5,056

  • -14% YoY
  • -8.3% MoM

“In the context of a low supply of properties on the market and persistent high demand, pressure on prices for residential real estate in the Montreal region remains strong. The good news is that in November, new listings showed signs of exceeding pre-pandemic levels when compared to November 2019 or even 2018,” said Charles Brant, QPAREB’s director of market analysis. “The announcement of an earlier-than-expected rise in interest rates no doubt motivated potential sellers to advance their project in order to benefit from the sustained activity and the opportunity to sell at the best price.”

Source: Quebec Professional Association of Real Estate Brokers (QPAREB)

Calgary

Sales: 2,110

  • +46.8% YoY
  • -3.4% MoM

Benchmark Price (all housing types): $461,000

  • +8.9% YoY
  • +0.2% MoM

New Listings: 1,989

  • +15.2% YoY
  • -20% MoM

“Lending rates are expected to increase next year, which has created a sense of urgency among purchasers who want to get into the housing market before rates rise,” said CREB Chief Economist Ann-Marie Lurie. “At the same time, supply levels have struggled to keep pace, causing tight conditions and additional price gains.”

Source: Calgary Real Estate Board (CREB)

Ottawa

Sales: 1,459

  • -9% YoY
  • -13% MoM

Average Price (single-family detached): $716,992

  • +19% YoY
  • +0.08% MoM

New Listings: 1,430

  • -13% YoY
  • -27% MoM

“Despite significant increases in average prices over November 2020, month-to-month price accelerations have tapered off slightly, with average prices for residential units on par with October’s and condo average prices increasing by 7%. This is a far better situation than the monthly price escalations we had seen in the first quarter of 2021,” said Ottawa Real Estate Board President Debra Wright. “However, there is no question that supply constraints will continue to place upward pressure on prices until that is remedied.”

Source: Ottawa Real Estate Board (OREB)

Steve Huebl