Home sales recorded over Canadian MLS® Systems climbed 6.6% between January and February 2021 to set another new all-time record. (Chart A)
Seasonally adjusted activity was running at an annualized pace of 783,636 units in February. CREA’s revised forecast for 2021 is in the neighbourhood of 700,000 home sales. Strong demand notwithstanding, sales may be hard pressed to maintain current activity levels in the traditionally busier spring months absent a surge of much-needed new supply; although, that could materialize as current COVID restrictions are increasingly eased and the weather starts to improve.
The month-over-month increase in national sales activity from January to February was led by the Greater Toronto Area (GTA) and a number of other Ontario markets, along with Calgary and a number of markets in B.C. These offset a considerable decline in sales in Montreal, where new listings have started off 2021 at lower levels compared to those recorded in the second half of last year.
Actual (not seasonally adjusted) sales activity posted a 39.2% y-o-y gain in February. In line with heightened activity since last summer, it was a new record for the month of February by a considerable margin (over 13,000 transactions). For the eighth straight month, sales activity was up in the vast majority of Canadian housing markets compared to the same month the previous year. Among the eight markets that posted year-over-year sales declines in February, extremely limited supply at the moment is the most likely explanation.
“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. As lockdowns continue easing across the country and the spring market begins to ramp up, we will remain vigilant in adhering to all the latest government and health officials’ directives to keep our clients safe. Now as always, REALTORS® remain the best source for information and guidance when negotiating the sale or purchase of a home,” continued Poulopoulos.
“We are right at the start of the first undisturbed (by policy or lockdown) spring housing market in years and we also have the most extreme demand-supply imbalance ever by a large margin. So, the question is, what is going on? I think part of it is demand that built up as a result of regulatory changes in the years leading up to COVID that is playing out now. Part of it is demand that is being pulled forward from the future either in search of a home base to ride out the pandemic, or to lock down a purchase amid rapidly rising prices while securing a record low mortgage rate,” said Shaun Cathcart, CREA’s Senior Economist. “But maybe the biggest factor here is the emergence of existing owners with major equity, prompted by the great shake up that is COVID-19 to pull up stakes and move. First-time buyers, which we have a lot of, are now having to compete with that as well.”
The number of newly listed homes rebounded by 15.7% in February, recovering all the ground lost to the drop recorded in January. With sales-to-new listings ratios historically elevated at the moment, indicating almost everything that becomes available is selling, it was not surprising that many of the markets where new supply bounced back in February were the same markets where sales increased that month.
With the rebound in new supply outpacing the gain in sales in February, the national sales-to-new listings ratio came off the boil slightly to reach 84% compared to the record 91.2% posted in January. That said, the February reading came in as the second-highest on record. The long-term average for the national sales-to-new listings ratio is 54.4%.
Based on a comparison of sales-to-new listings ratio with long-term averages, only about 15% of all local markets were in balanced market territory in February, measured as being within one standard deviation of their long-term average. The other 85% of markets were above long-term norms, in many cases well above. The first two months of 2021 and second half of 2020 have seen record numbers of markets in seller’s market territory. For reference, the pre-COVID record of only around 55% of all markets in seller’s territory was set back at the beginning of 2002.
The number of months of inventory is another important measure of the balance between sales and the supply of listings. It represents how long it would take to liquidate current inventories at the current rate of sales activity.
There were only 1.8 months of inventory on a national basis at the end of February 2021 – the lowest reading on record for this measure. The long-term average for this measure is a little over five months. At the local market level, some 40 Ontario markets were under one month of inventory at the end of February.
The Aggregate Composite MLS® Home Price Index (MLS® HPI) jumped by 3.3% m-o-m in February 2021 – a record-setting increase. Of the 40 markets now tracked by the index, all but one were up on a m-o-m basis.
The non-seasonally adjusted Aggregate Composite MLS® HPI was up 17.3% on a y-o-y basis in February – the biggest gain since April 2017 and close to the highest on record. (Chart B)