CREA Expects Record Home Sales in 2021 as Canadian Housing Market Continues to Set Records

Statistics released on March 15 by the Canadian Real Estate Association (CREA) show national home sales set another all-time record in February 2021.


  • National home sales rose 6.6% on a month-over-month (m-o-m) basis in February.
  • Actual (not seasonally adjusted) activity was up 39.2% year-over-year (y-o-y).
  • The number of newly listed properties rebounded by 15.7% from January to February.
  • The MLS® Home Price Index (HPI) jumped 3.3% m-o-m and was up 17.3% y-o-y.
  • The actual (not seasonally adjusted) national average sale price posted a 25% y-o-y gain in February.

“At this point everyone knows how far the current monthly sales numbers are from historical norms, and that they have been setting record after record for eight months now, so this should not be a surprise like the weak numbers posted last spring were,” stated Costa Poulopoulos, Chair of CREA. “The two big challenges that continue facing Canadian housing markets are the same ones we’ve been facing for months – COVID-19 and a lack of supply. With luck, potential sellers will feel more comfortable listing their homes in the short-term,” continued Poulopoulos.

Listings rebounded in February from January, but the national sales-to-new listings ratio is still the second highest on record, CREA said.

The Toronto area’s hot COVID housing market is helping lead record home sales across the country and throwing heat at smaller Ontario centres — a trend that’s expected to continue through the year. CREA reported that Kitchener, Barrie, Hamilton and Niagara saw February home prices soar between about 25% and 30% year-over-year. Montreal saw an increase of 18.8% while Vancouver Island, Winnipeg, and Quebec increased between 10% and 15%. In the GTA, resale homes rose 15% year-over-year in February, and suburban detached houses were up nearly 30% that same month. However, the largest gains, 35%, were reported in the Lakelands region of Ontario cottage country, Tillsonburg District and Woodstock-Ingersoll.

Throughout the second half of 2020 and the start of 2021, realtors reported bidding wars and high numbers of offers for suburban homes or properties that need renovations. CREA doesn’t believe those trends will dissipate soon and has revised its sales forecast accordingly. CREA, is now predicting home sales to reach 702,000 units this year, up 27% from last year, while the average selling price is set to hit $665,000, up 17% from last year. However, the association expects activity to cool in the latter half of the year and into next.

The forecast for 2021 is significantly higher than the association’s December prediction for annual sales of 584,000 and average selling price of $620,400. The association credited an increasingly middle-aged millennial cohort entering the housing market for the spike in demand.

Canada’s red-hot housing market is spurring comparisons to earlier bubbles and prompting calls for cooling measures, but policymakers are unwilling to intervene for fear of undermining the economic recovery from the COVID-19 pandemic. 

Source: Globe and Mail
Source: Toronto Star
Source: Toronto Star
Source: Financial Post
Source: CREA

Canada’s Annual Pace of Housing Starts Slowed in February, CMHC Says

Canada Mortgage and Housing Corp. says the annual pace of housing starts in February slowed compared with January. The housing agency says the seasonally adjusted annual rate of housing starts for February fell to 245,922 units compared with 284,372 in January.

The drop came as the annual pace of urban starts fell 14% in February to 231,042 units as the pace of starts of apartments, condos and other types of multiple-unit housing projects fell 15.8% to 163,757. The annual pace of urban starts of single-detached homes fell 9.3% to 67,285.CMHC estimates the annual pace of rural starts at 14,880 units.

The six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 242,777 in February, down from 244,963 in January.

“The national trend in housing starts declined in February, but remained elevated,” said Bob Dugan, CMHC’s chief economist. “Single-detached SAAR [seasonally adjusted annual rates] starts declined in February following strong growth in January, particularly in Montreal. Multi-family SAAR starts also declined in several centres in February, further contributing to the decline in the overall trend.”

Source: Globe and Mail
Source: Toronto Star
Source: News Wire

Rising Mortgage Rates Yet to Put a Dent in Exuberant Housing Market as Policymakers Take Note

Mortgage rates are climbing across Canada, but even increased borrowing costs may not be enough to tame a raging market for residential real estate that is starting to catch the attention of policymakers. Recent housing market activity has been “much stronger than expected,” the Bank of Canada said. Mortgage rates, meanwhile, remain relatively low, even as they’ve been ticking up lately.

Fixed mortgage rates have climbed by about 40 basis points, or 0.4%, since the start of the year, according to James Laird, co-founder of and president of mortgage brokerage CanWise Financial. More increases are expected, Laird said, to match the 50 to 60 basis-point move in bond yields. Usually this would spark a rush of borrowers trying to lock rates in before a lull in activity, he noted.

There may not be such a breather this time around, however, as COVID-19 has prompted many Canadians to rethink their housing situations and opt for more space. Moreover, the Bank of Canada’s five-year benchmark rate hasn’t budged from 4.79%, meaning a key input of the “stress test” borrowers have to pass for a loan remains unchanged as well.

Canada’s housing market appears to have gotten off to a strong start this year. That ongoing demand is good for sellers and good for sectors of the economy that thrive in such conditions — “we need the growth we can get,” Bank of Canada Governor Tiff Macklem said in February. However, surging real estate prices aren’t as beloved by buyers struggling to get into the market or by policymakers concerned about debt levels, with even Macklem noting they are starting to see some signs of “excess exuberance.”

A recent survey by online realtor Zoocasa found that 78% of respondents felt the pandemic had caused suburban and small-town real estate prices to rise at unsustainable rates.

“If Canadians are taking out permits and buying resales at such a pace during winter then what does that say when the key spring housing market and vaccines arrive?” wrote Derek Holt, head of capital markets economics at Bank of Nova Scotia, in a recent note to clients. “Policy is arguably overly easy and (macroprudential) changes may be afoot in a spring budget.”

Royal Bank of Canada economist Robert Hogue also noted in a recent report that the “odds of policy intervention increase the hotter markets get.”

“Events in British Columbia (2016) and Ontario (2017) have shown us policymakers come under intense pressure to stabilize markets and contain household leverage risks when prices spiral upward,” he added, referencing previous taxes imposed on foreign buyers in those two provinces in response to skyrocketing home prices.

There is already a policy being worked on in Ottawa that is similar to those measures. In its fall economic update, the federal Liberal government said it would “take steps over the coming year to implement a national, tax-based measure targeting the unproductive use of domestic housing that is owned by non-resident, non-Canadians, which removes these assets from the domestic housing supply.”

Yet a federal foreign ownership tax may not really address what’s causing the housing market’s recent flurry of activity, which seems to be driven more by pandemic-related shifts in demand, low mortgage rates, limited supply and an increase in household savings.

“The challenge is always what sort of policy intervention would be effective, because often when we’re dealing with issues related to declining housing affordability, the government response is to implement policies that make it more affordable for buyers that can’t get into the market,” said Craig Alexander, chief economist at Deloitte Canada. “What ends up happening is you actually boost demand, which ultimately ends up maintaining the growth in prices.”

Alexander is also expecting to see listings increase as the pandemic is further reined in and vaccines are further rolled out. That could alleviate some of the concerns about supply, while rising interest rates could still tamp down a bit of demand. “Rising fixed mortgage rates are not going to be enough to cause a market correction,” Alexander said, “but it should contribute to helping cool the market.”

Robert McLister, mortgage editor at Ratesdotca, said a 100-basis point spike in rates “would barely make a dent in home prices,” as that would suggest an improving economy with stronger employment and wages, helping drive demand for real estate. Something stronger, such as a 200 to 250-point surge in mortgage rates, would be a different story, he noted in an email.

“Buyers hear that rates are shooting higher and they rush to lock in pre-approvals and buy a home,” McLister added. “Longer-term, rising rates are kryptonite for home prices, but only if the increases are significant.”

Source: Financial Post

Home Prices Are up in All 11 Major Canadian Markets for the First Time Since 2018

Canadian home prices accelerated in February, rising 0.5% from January with all 11 major markets rising on the year for the first time since 2018, data showed on March 17.

The Teranet-National Bank Composite House Price Index, which tracks data collected from public land registries to measure changes for repeat sales of single-family homes, showed price gains in seven of the 11 major metropolitan markets.

Prices rose 2.3% in Halifax, 1.1% in Hamilton and 0.8% in Vancouver, but the index was down 0.1% in Edmonton and fell 0.5% in Ottawa-Gatineau.

On an annual basis, the index was up 9.8% in February, the seventh consecutive monthly acceleration and the strongest 12-month gain since September 2017.

Ottawa-Gatineau continued to lead year-over-year gains, up 19.0% from February 2020, followed by Halifax at 18.7% and Hamilton at 18.1%. Calgary was up 0.8%, its first annual gain since June 2018, though it remained well below its 2014 peak.

Teranet also has indexes for seven smaller cities just outside the Greater Toronto Area, which posted year-on-year gains ranging from 17.2% to 23.1%. Toronto, by comparison, was up 10.1% on the year.

Source: Financial Post
Source: Globe and Mail

Dispute Between Bricklayers and Stucco Appliers to Delay Construction of New Homes in Ontario’s Red-Hot Property Market

A labour union dispute between bricklayers and stucco appliers is delaying construction of new homes in Ontario and could spark another surge in home prices amid tight supply due to COVID-19 restrictions. Home builders alleged bricklayer members of Local 183 of the Labourers International Union of North America were refusing to work if non-union stucco contractors were on the same job site, according to an Ontario Labour Relations Board ruling this month.

Michael DeGasperis, President and CEO of Arista Homes Ltd. in Concord, just north of Toronto, said home builders accept that stucco workers be members of a union. But preferably not Local 183 because he said they’re more expensive than another union, Local 1891 of the International Union of Painters and Allied Trades.

Cesar Rodrigues, Local 183 sector co-ordinator for bricklaying and masonry, declined to comment when reached on March 15. Seven other union leadership members didn’t reply to emails. The union switchboard didn’t appear to be functioning Monday.

The dispute stems from a provision triggered last summer in Local 183’s collective bargaining with the home builders that requires stucco workers on jobs be part of the union, according to the board hearing. The board ruled that while Local 183 didn’t strike, it did threaten an unlawful strike. The board ordered the union to cease and desist its efforts holding up the bricklayers from finishing work. Board chairman Bernard Fishbein also suggested there was nothing preventing the union from filing a grievance.

Now, some builders are requesting more labour board hearings and starting court cases to force Local 183 to co-operate, DeGasperis said. “We’re going to have to see what kind of resolutions come out of those,” he said. “We are confident that we are going to beat them, both at the Labour Relations Board and in the courts.”

At issue is some 4,000 homes under construction across the Greater Toronto Area, of which Arista has about 10%, and the added cost of using union stucco workers. He estimated they could add $5,000 to $20,000 to the cost of a house depending on the job size and the union. Using Local 1891 might cost 10% more than non-union workers while Local 183 as much as 50% more, he said.

Other construction companies named in the board hearing included Regal Crest Homes, Aspen Ridge, Deco Homes, Sorbara Homes, Fernbrook Homes, CountryWide Homes and Mattamy Homes.

The provincial home-construction industry needs to build 75,000 new homes a year over the next 24 years just to keep up with demand, but is short 12,000 units per year, according to the the Residential Construction Council of Ontario.

“This is happening at a time when the industry has been declared an essential service by government and we are struggling to keep pace with the demand for new housing in the face of COVID-19-related challenges,” council president Richard Lyall, said. “Thousands of homes will not be completed on time.”

Toronto was ranked the 5th least affordable housing market in a study released in February by the Winnipeg-based Frontier Centre for Public Policy and the Urban Reform Institute of Houston. It followed Auckland, Sydney, Vancouver and Hong Kong as most expensive.

Source: Financial Post