By Peter Squire
The Winnipeg Regional Real Estate Board (WRREB) recently had the pleasure of hearing the Canadian Real Estate Association’s (CREA) senior economist, Shaun Cathcart, provide a no holds barred commentary on the national housing market. He delivered his insightful presentation to 400
attendees at the WRREB Market Insights event held online February 3.
Our local market is currently experiencing limited supply conditions combined with high demand. The first half of February showed no let-up of this pattern, one that has been occurring in most Canadian real estate markets since the second half of 2020.
While WRREB’s market region is not quite as hot as the national average (as of January 2021), it is still simmering along. The sales-to-new listings ratio for single-family homes is over 80 % in the first 15 days of February 2021. Showing requests increased by 115% for all MLS® property types (9,565/4,441) from February 10 to the 16 over the same time period last year.
It is worth sharing Cathcart’s comments about January 2021 and what we might expect moving forward:
National View — Desperately Seeking Supply: Listings at Lowest Level on Record
Housing markets across Canada don’t care our calendars have advanced by another year, so, not surprisingly, 2021 started just as 2020 ended.
The January 2021 housing numbers set quite a few records. In fact, it was a record number of records.
Nationally, MLS® sales in January 2021 set an all-time record — more than 736,000 on a seasonally adjusted annualized basis. Average annual sales for the month of January over the last decade are under 500,000.
Overall supply is at the lowest level on record. We’re below 100,000 listings at this point, whereas six or seven years ago we had in the neighbourhood of 250,000 listings.
The sales-to-new listings ratio hit an all-time high in January of over 90% (normal/average is around 55%).
Nationally, the number of months of inventory on the MLS® fell below two months for the first time ever. For some historical perspective on that, the housing boom we saw back in the early 2000s had 3.5 to four months of inventory the whole time, which was the previous record low. We’re about half of that right now.
Prices under these types of conditions are doing exactly what you would expect — they’re rising and rising fast. The overall aggregate composite MLS® HPI benchmark price has climbed by around $75,000 in the last seven months alone. For single-family, that number is about $100,000.
“Your house will make more than you will this year,” used to be a joke reserved for a few neighbourhoods in Vancouver. Not anymore.
In fact, the only one of our key national metrics that did not set a record in January 2021 was the one we need the most right now — new listings.
The spring market is a big deal for housing. The spring of 2018 and 2019 were kind of boring as the B-20 mortgage stress test was still effecting demand negatively at that point. Spring 2020 would have been a wild one, but we all went into those initial lockdowns. As such, we haven’t had a really active spring market for a few years now.
In contrast to 2020, this year it’s looking like we’ll be coming out of lockdowns as the weather starts to improve.
It seems to me people are also feeling a lot more comfortable getting on with their lives despite the virus, at least much more so than last spring.
I guess what I can say with some confidence about the next few months of housing activity in Canada is it will most certainly be headline-grabbing.
The big wildcard this year, as I’ve mentioned previously, is desperately needed new supply. You can’t wave a magic wand and build new homes overnight. But you can, in theory, get a quick supply response from the existing housing stock if existing owners put their homes up for sale.
Admittedly, that is the opposite of what we have seen over the last year. However, what about all those would-be sellers who stayed on the sidelines last year? What are they up to? At this time of year, they may be getting ready to list their homes for sale, but we won’t be able to see them until they hit our MLS® Systems. Is it the calm before the storm? Or maybe, the tide going out right before it comes back in (in a big way!)?
It can be tricky because housing supply shortages can reinforce themselves. If you’re relying on existing owners to supply the market, and they aren’t going anywhere until they find something “better”, and the overall supply for them to choose from is already at a record low, the supply of homes that are “better” enough for them to spur a move becomes a needle in a haystack. Meanwhile, their current home’s value is shooting up by six figures every year.
Anyway, I’ve got my fingers crossed for a burst of new listings this spring. That is the key to getting all these buyers into the homes they want to own, as well as spreading the demand out so price growth can start to calm down as opposed to continuing to accelerate. -SC
If you were hoping for some relief from the word “unprecedented” in 2021, this article about Canadian housing markets is not likely to be of help in that regard. Here’s hoping the approaching spring will bring renewal in more areas than just warm weather.
Peter Squire is the Winnipeg Regional Real Estate Board’s Vice-President, External Relations & Market