Last spring, the chief economist of BMO described Canada’s housing market in a fiery fashion.
Douglas Porter called it a “towering inferno”, as record-high sales and prices broke into uncharted territory.
It’s now autumn, and the market continues to flare.
“The Fire Still Burns” is how BMO senior economist Robert Kavcic partially titled his recent report about Canadian home sales.
“No surprise here,” Kavcic wrote.
“The market is still drum tight, and demand is still feasting thanks to low mortgage rates, a strong job market, expectations of continued price gains, and probably some additional activity ahead of mortgage rate hikes (especially for those with a contract in hand),” the BMO economist continued.
Kavcic made the commentary on the same day that the Canadian Real Estate Association released its report about sales.
CREA noted that 2021 is “already a record year” even though sales in November and December are yet to be accounted for.
From January to October, a total of 581,275 residential properties across Canada traded hands.
The number surpassed the annual record of 552,423 sales for all of 2020.
CREA senior economist Shaun Cathcart noted in a media release on November 15 that 2021 “continues to surprise”.
“Sales beat last year’s annual record by about Thanksgiving weekend so that was always a lock, but I don’t think too many observers would have guessed the monthly trend would be moving up again heading into 2022,” Cathcart stated.
In October, national home sales increased 8.6 percent month-over-month from September.
Meanwhile, the benchmark price of a home in Canada rose 2.7 percent month-over-month in October.
On a year-over-year basis, the price jumped 23.4 percent.
As for listings, the number of properties that came on the market increased 3.2 percent from September to October.
“A month with more new listings is what allows for more sales because those listings are mostly all still getting gobbled up; however, with demand that strong, the supply of homes for sale at any given point in time continues to shrink,” Cathcart stated.
The CREA economist continued, “It is at its lowest point on record right now, which is why it’s not surprising prices are also re-accelerating. We need to build more housing.”
Going back to BMO’s Kavcic, the bank economist noted that new listings in October were down 19.6 percent compared to last year.
This resulted in sales-to-new listings ratio rising to 79.5 percent in October.
The CREA report noted that the ratio was 75.5 percent in September and 73.5 percent in August.
The long-term average for the national sales-to-new listings ratio is 54.8 percent, the association explained.
Against such backdrop, Kavcic noted that “price momentum is accelerating again”.
The BMO economist provided what he refers to as the “bottom line”.
“The Canadian housing market is well overdue for higher [interest] rates, and momentum is still pointing upward until it gets them,” Kavcic wrote.