Canada’s housing markets played catch-up in a big way by breaking records in July, after COVID-19 put a chill on the typically busy spring buying season.
The Canadian Real Estate Association (CREA) says 62,355 homes changed hands in July, the most in a single month since record keeping began more than four decades ago, against the backdrop of one of the highest unemployment rates in the country’s history. Sales were up 30.5 per cent compared to July 2019 and 26 per cent compared to last month.
"What a difference three months makes, from some of the lowest housing numbers ever back in April to the multiple monthly records logged in July," said Shaun Cathcart, CREA's senior economist.
"A big part of what we're seeing right now is the snap back in activity that would have otherwise happened earlier this year.”
The country’s three largest markets led the way in month-over-month gains. The Greater Toronto Area was up 49.5 per cent, Greater Vancouver was next at 43.9 per cent, followed by 39.1 per cent in Montreal.
CREA says people not listing their homes during the pandemic helped push inventories to a 16-year low, but people will eventually be more willing to dip their toes into the market.
“Some purchases will no doubt be delayed, but the new-found importance of home, lack of a daily commute for many, a desire for more outdoor and personal space, room for a home office, etc. will certainly also spur activity that otherwise would not have happened in a non-COVID-19 world,” said Cathcart.
The national average sales price hit a record $571,500, up 14.3 per cent from the same month last year. But the measure can be misleading because of the outsized effect of higher-priced homes in Toronto and Vancouver.
The Aggregate Composite MLS Home Price Index (MLS HPI) strips out factors that could distort the average price. It was up 7.4 per cent compared to July 2019, the largest gain since late 2017. It was up 2.3 per cent in July compared to the previous month, for the second largest jump on record (after March 2017) going back 15 years.
Pockets of relative affordability
Prices were up month-over-month in all 20 markets tracked, led by the GTA, Guelph, Ottawa, and Montreal — all at around 3 per cent.
Despite the run up, Zoocasa says there are still pockets of relative affordability, like parts of the Prairies.
“With benchmark prices under $500,000, buyers in these regions can find relative affordability with respect to price compared to other markets across the country,” said the real estate brokerage and listings site.
“For instance, in Calgary the Aggregate Composite MLS HPI adjusted for seasonality declined 0.39 per cent since June, but rose by the same amount in Edmonton. Markets like Regina and Saskatoon also reflected stability on a month-over-month basis when prices were adjusted for seasonality, with the MLS HPI rising just 0.13 per cent and 0.14 per cent respectively.”
Speed bumps ahead
BMO senior economist Robert Kavcic says the real estate market’s performance has surprised the bears and demand continues to build, but there are speed bumps ahead.
“While real estate has largely sailed through the pandemic, questions linger about the outlook when massive support programs start to expire, and the market is left more to its own devices. As the CERB winds down and evolves, the impact will likely be disproportionately heavy at the lower end of the resale market and in the rental segment,” said Kavcic.
“Mortgage deferrals should be absorbed into outstanding balances which will increase the debt level, but limit any payment shock, especially for those that can refinance at record-low rates. Still, we'd expect activity to start trailing off from July's torrid rate going forward.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.