The national real estate numbers are in for the month of April, and reveal that while markets across the country continue to be extremely competitive, the pandemic-related urgency that has driven record sales over the past year appears to be winding down.
The Canadian Real Estate Association (CREA) reports that the number of sales dropped between March and April by 12.5%, though are a whopping 256% higher compared to the same month last year. The largest declines were seen in British Columbia and Ontario, though 85% of all Canadian markets experienced a dip in activity month over month.
“While housing markets across Canada remain very active, there is growing evidence that some of the extreme imbalances of the last year are beginning to unwind, which is what everyone wants to see happen,” stated Cliff Stevenson, Chair of CREA. “That said, the slowdown in sales activity between March and April was at a time that COVID cases, including very concerning variants, hit their highest levels ever and many jurisdictions enacted fresh lockdowns, making it harder to get a clear read on the underlying levels of demand and supply. 2021 may be another year where some of the spring market gets pushed into the summer by COVID-19.”
Market Is Stronger Than It Was Pre-Pandemic
It should be noted that the year-over-year April comparisons are distorted due to the inactivity in the market at the depth of the pandemic – as the first lockdown measures set in, buyers, sellers, and the real estate industry as a whole generally froze operations. Activity rebounded strongly in the months that followed as real estate was declared an essential service, agents adapted their services to fall within social distancing guidelines, and buyers and sellers became comfortable operating in the COVID-19-era market.
However, looking to the period prior to the pandemic, the market has strengthened over the long-term, too; compared to conditions two years ago, sales are up by more than half; a total of 66,193 homes sold across Canada in April 2021, compared to around 38,000 at the start of 2019. The average national home price in April 2019 was $495,000.
“While the April national numbers indicate buyers may be taking a breather from the frantic pace that has defined the pandemic-era market, we are still experiencing elevated conditions from a historical perspective,” says Penelope Graham, Managing Editor at Zoocasa. “When we look to the same time period in 2019, sales and average price growth have far exceeded the long-term average, up around 70% and 40%, respectively. It remains a very advantageous time to sell a home, while buyers will continue to grapple with short supply and competitive bidding scenarios.”
Home Price Growth Hits New Record in April
While sales activity may have slowed its pace over the short term, home prices continue to reach new heights; the average sale price across all Canadian markets came to $696,000 in April, a record year-over-year increase of 41.9%.
The MLS Home Price Index, which measures the pace of price growth, rose by 23% annually and by 2.4% month over month, reflecting heated markets over a long time period that have put significant pressure on home values, even taking into account the 10% dip in average price experienced by the market last April.
This has been caused by unprecedented demand among buyers, particularly for higher-priced detached homes, during the depths of the pandemic. As lockdowns required that people stay at home, properties that could accommodate virtual work and school needs, and with access to green space, became especially popular. Buyers also increasingly considered smaller cities and towns where real estate prices are considerably more affordable than in big city centres, which has amped up the competition, and price growth, in these typically slower markets. The largest price gains were experienced in Ontario markets (between 20 – 50%), and in BC, Quebec, and New Brunswick, between 10 – 30%. The prairie markets and Newfoundland – which had experienced long-term declines pre-pandemic – saw home values increase between 5 – 15%.
However, as has long been the case, benchmark prices are widely varied across the country, topping the million-mark in Canada’s largest markets, and considerably lower in the prairies and atlantic Canada:
- Greater Vancouver: $1,097,900
- Greater Toronto: $1,005,500
- Calgary: $447,800
- Montreal: $483,200
- Greater Moncton: $249,500
Supply of Homes for Sale Remains Historically Low
Another key issue is that the supply of homes for sale is far too low to keep pace with demand – while a number of new listings came to market in March, that was effectively wiped out by a -5.4% decline in April, with about 70% of markets experiencing a decline.
This imbalance is keeping the national market mired in a steep sellers market, with a national sales-to-new-listings ratio (SNLR) of 75.2%. This ratio is a metric used by CREA to determine the level of competition in the housing market; calculated by dividing the number of sales by the number of new listings over the course of the month, a range between 40 to 60% indicates a balanced market, with above and below that range indicating sellers’ and buyers’ markets, respectively. While last month’s ratio is substantially lower than the record-breaking 90.6% recorded in January, it’s evident that buyers are experiencing challenging dynamics in markets across the country. For context, the long-term average for the national SNLR is 54.4%.
The total months of inventory – which measures how long it would take to completely sell off all homes for sale on the market – sat at 2 months in April, again an improvement from the 1.7 months recorded in March, but well below the long-term average of five months.
Analysts are keen to see whether the short-term slowdown in national sales will continue throughout the typically busy summer months, and whether a softer pace will eventually trickle down to prices. As mortgage rates are poised to remain low for the foreseeable future, and vaccine rollouts become more prevalent, the usual fundamentals that support a busy market are likely to return, too.