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Inventory rises, but sellers’ market conditions persist

With 2,989 sales, housing market activity hit a new May record.

Despite strong levels of sales, they did trend down relative to last month. Additionally, there were 4,562 new listings, causing seasonally adjusted inventory levels to increase over last month.

“The recent gains in prices have encouraged more homeowners to list their homes and take advantage of the current market situation,” said CREB® chief economist Ann-Marie Lurie.

“However, the inventory gains are still not enough to offset the demand growth and the market continues to favour the seller. Prices are rising, but they are still recovering in our market from previous highs in 2014. Only detached and semi-detached home prices in certain districts and communities have recovered to the level of previous monthly highs.”

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Calgary housing market sees best March sales in over a decade

The initial impact of COVID-19 on the housing market began last March. One year later, it is not a surprise that March sales in 2021 were higher than in 2020.

However, at 2,903 sales, this was the highest March total since 2007. “Low lending rates and improved savings have supported sales activity,” said CREB® chief economist Ann-Marie Lurie.

“However, sales have been somewhat restricted by the lack of listings. This month there was a jump in new listings, contributing to the strong monthly sales.” Inventory levels pushed above 5,400 units, but citywide months of supply fell below two months. This reflects the lowest months of supply for March since 2014 and these tight conditions have contributed to price gains.

In March, the benchmark price trended up over last month to $441,900, over six per cent higher than last year’s levels. The price gains have moved the market closer to recovery, but prices remain over five per cent lower than 2014 highs.

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Calgary Real Estate Board

Amidst economic challenges, housing market ends 2020 on a high note

With December sales of 1,199, this is the highest December total since 2007.

“Housing demand over the second-half of 2020 was far stronger than anticipated and nearly offset the initial impact caused by the shutdowns in spring. Even with the further restrictions imposed in December, it did not have the same negative impact on housing activity like we saw in the earlier part of the year,” said CREB® chief economist Ann-Marie Lurie.

Attractive interest rates along with prices that remain lower than several years ago have likely supported some of the recovery in the second half of the year. However, it is important to note that annual sales activity declined by one per cent compared to last year and remain well below long-term averages.

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Calgary Real Estate Board

Sales activity remains strong in November

For the sixth month in a row, sales in the Calgary market recorded a year-over-year gain.

Sales growth over the past several months has been the strongest seen in the past five years, but the activity has not been strong enough to offset the pullbacks from the spring. Year-to-date sales remain over three per cent lower than last year’s levels. New listings continue to slow, reducing inventory in the market. On a year-to-date basis, new listings have eased by nearly ten per cent and are at the lowest level recorded since 2001. This has reduced the oversupply that has been impacting the market for nearly five years.

“The gains in sales in the latter part of this year have been a bit surprising considering the job losses and unemployment rate in our city,” said CREB® chief economist AnnMarie Lurie.

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Sales decline by two per cent from last year amidst COVID-19 pandemic

After three months where COVID-19 weighed heavily on the housing market, sales activity in June continued to trend up from the previous month, totaling 1,747 units.

Caution remains necessary as monthly sales are nearly two per cent lower than activity recorded last year. However, this represents a significant improvement compared to the past several months where year-over-year declines exceeded 40 per cent.

“Recent price declines, easing mortgage rates and early easing of social restrictions are likely contributing to the better-than-expected sales this month,” said CREB® chief economist Ann Marie Lurie.

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Canada’s Housing Market Woke up in May

Monthly Housing Market Update

Highlights:

  • Home resales reversed one-third of the March-April drop: The gradual reopening of the economy across Canada set the stage for activity to rise 57% from a generational low in April. All major markets recorded monthly increases ranging between 40% and more than 90%. Still, the 313,000 units sold (seasonally-adjusted and annualized) nationwide represented the second-lowest level since early-1999.
  • Sellers made their move after holding off for nearly two months: New listings surged 69% in May from April’s low point. This contributed to ease demand-supply conditions that had remained particularly tight since the onset of COVID-19.
  • Prices cresting: The level of Canadian Real Estate Association’s Home Price Index was effectively flat compared to April. The annual rate of increase in the index inched down to 5.4% in May from 5.6% in April. We expect further broad-based weakening in the period ahead.
  • Rising supply will erode price support: The delay in spring listings will likely boost supply during the summer at a time when homebuyer demand will still be soft—albeit recovering. The eventual winding down of financial support programs is also poised to bring more supply to market later this year.
  • Number of transactions will recover only gradually and unevenly: The severe economic shock of COVID-19 will upset many Canadians’ plan to own a home for some time to come. This will be especially the case in oil-producing regions of the country where high unemployment will weigh heavily on housing demand.

Percentage changes impressive but overstate May’s rebound

The jump in home resales last month wasn’t a surprise given the earlier plummet—to a 36-year low in April—had much to do with the unprecedented lockdowns and social distancing orders imposed since mid-March. It was clear the lifting of some of these measures in May would kick the market into gear. Yet the eye-catching month-to-month gains across the country overstate the rebound. Activity was still 40% to more than 50% below year-ago levels in most major markets. The increase in May made up only one-fifth of the drop in March and April in Vancouver and Toronto, and closer to one-quarter in Ottawa. Markets in Saskatchewan and Manitoba were further ahead in the recovery—sales reversing 50% to almost 85% of the declines in the previous two months—reflecting the relatively speedier reopening of the economy in these provinces.

May Market Snapshot

Resales have more (albeit limited) room to recover near term

We expect to see more buyers returning to the market this summer as they become more comfortable house hunting amid falling infection rates and as provincial governments continue to relax social distancing restrictions. That said, we expect that many won’t return due to COVID-19 and the collapse in oil prices. Slower immigration will also be a dampening factor keeping housing demand soft, especially in oil-producing regions.

Supply starting to decouple from demand

There are early signs demand and supply are decoupling. After falling in tandem in March and April, supply rose faster than demand in May. The 69% m/m surge in new listings brought the Canada-wide sales-to-new listings ratio down to 0.59 from 0.63 in April. The ratio fell in the majority of markets outside Ontario with Montreal and other Quebec markets posting large declines (though from generally elevated levels). New listings tripled in May in Montreal after the provincial government lifted the lockdown it imposed on the real estate industry mid-March. New listings rose more modestly in most Ontario markets last month, further tightening demand-supply conditions in the province.

The story to watch going forward: supply

We expect further decoupling in the period ahead. Economic hardship is no doubt taking a toll on a number of current homeowners—including investors. Some of them could be running out of options once government support programs and mortgage payment deferrals end, and may be compelled to sell their property.

Market balance to erode

Despite easing in May, demand-supply conditions generally remained balanced across Canada or still favoured sellers. That’s likely to change. We expect the increase in supply to tip the scale in favour of buyers in many markets across Canada, some sooner than others. Vancouver and other BC markets, for example, could see buyers calling the shots as early as this summer. It could take a little longer in Ontario, Quebec and parts of the Atlantic Provinces. Buyers already rule in Alberta and Newfoundland and Labrador.

Downward price pressure to build

Canada’s HPI has likely crested. We believe downward price pressure will build in most markets in the coming months. Strong starting points in Ottawa, Montreal, Toronto and Halifax will provide these markets with a temporary buffer. Prices are already declining in Alberta, and Newfoundland and Labrador. Nationwide, we expect benchmark prices to fall 7% by the middle of 2021 though believe a widespread collapse in property values is unlikely.

COVID-19’s impact on Calgary housing market continues

Housing market activity in May remained slow, but sales exceeded the lows from April, which saw less than 600 sales in Calgary.

May sales totalled 1,080 units, a 44 per cent decline from last year’s figures.

“The initial shock of COVID-19 and social distancing measure is starting to ease. This is bringing some buyers and sellers back to the market. However, this market continues to remain far from normal and prices are trending down,” said CREB® chief economist Ann-Marie Lurie.

“Activity has also shifted toward more affordable product, which is likely causing differing trends depending on product type and price range.”

Sales are down in all price ranges, but a greater share of sales are priced below $500,000.

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