15 Apr Home sales activity crashed last month, but here’s why property prices will not — for now
Canadian real estate sales activity was predictably down in March, as buyers remained on the sidelines and social distancing led to fewer showings.
National home sales fell 14.3 per cent in March, compared to February, but were up 7.8 per cent compared to the same period last year, according to the Canadian Real Estate Association.
Canada’s largest markets saw sales plunge as the coronavirus lockdown took hold, with transactions in the Greater Toronto Area down 28 per cent, Montreal contracting 13.3 per cent and Greater Vancouver edging 2.9 per cent lower. Calgary (-26.3 per cent), Edmonton (-13.2 per cent), Winnipeg (-7.3 per cent), Hamilton-Burlington (-24.9 per cent) and Ottawa (-7.9 per cent) also saw some considerable declines.
“March 2020 will be remembered around the planet for a long time. Canadian home sales and listings were increasing heading into what was expected to be a busy spring for Canadian realtors,” said Jason Stephen, president of CREA. “After Friday the 13th, everything went sideways.”
But amid buckling sales, home prices managed to inch up from last month. CREA’s home price index rose 0.8 per cent in March compared to February, marking its 10th consecutive monthly gain. Over the past 12 months, average Canadian home prices have risen just under 7 per cent.
Bank of Montreal senior economist Robert Kavcic believes the reason prices have held up lies in the 12.5 per cent decline in the number of newly listed homes during March.
After Friday the 13th, everything went sideways
That suggests the federal government’s income and wage subsidy programs have kicked in and homeowners are not forced to sell their houses — just yet.
“Contrast that to 2008/09, when sales fell by almost 40 per cent from the end of 2007 to the 2009 lows, but new listings rose by 15 per cent through the early stages of that period — that’s how you get a quick and meaningful decline in prices.”
While there is little room for complacency, CREA senior economist Shaun Cathcart notes that preliminary data from the first week of April suggest new listings were only about half of what would be normal for that time of year.
Based on a comparison of the sales-to-new listings ratio with the long-term average, two-thirds of all domestic markets remained in balanced market territory in March 2020, said CREA.
“Virtually all of the remainder continued to favour sellers,” the association said in a statement.
We may get a clearer picture with April figures, as CREA notes that both home price and sales figures may be skewed this month given that activity in the first half was relatively stable before the complete freeze witnessed in the second half of the month.
“The numbers that matter most for understanding what follows are those from mid-March on, and things didn’t really start to ratchet down until week four,” Cathcart said in a statement.
While prices have held up, a protracted shutdown could lead to price weakness eventually.
“The longer the shutdown (and potential persistent economic damage) lasts, the more likely prices are to start falling,” Kavcic said. “But, for now, the market looks to be effectively on hold as listings are falling too, and support measures aim to prevent forced selling.”