Canadian real estate inventory appears scarce, but that might be starting to change. Canadian Real Estate Association (CREA) data shows new listings grew faster than sales in March. A massive amount of sales are actually being met with even more inventory these days. Record sales are due to pent-up and pulled-forward demand, but inventory isn’t. This leads to the possibility that inventory could run longer than sales. If that were to happen, it would ease market pressures without government intervention.
Canadian Real Estate Sees New Listings Soar
New listings for Canadian real estate were some of the highest on record last month. Seasonally adjusted there were 86,212 new listings in March, up 7.45% from a month before. Unadjusted new listings reached 105,001, up 50.72% compared to the same month last year. This is an exceptional amount of inventory coming to market all at once.
Canadian Real Estate New ListingsThe seasonally adjusted number of monthly new listings processed on the Canadian MLS. Source: CREA; Better Dwelling.
The number of new listings hitting the market was some of the highest ever seen. Seasonally adjusted new listings were a record high, as was the month-over-month growth. Unadjusted new listings were just under the May 2017 record high. That was the month non-resident buying rules were introduced. As for annual unadjusted growth, that’s also at an all-time high. The market rarely sees this much inventory coming to market at once.
Canadian Home Sales Reach A Record High
Canadian home sales are consuming the supply at an unusually high rate. Seasonally adjusted home sales reached 69,421 in March, up 5.22% from the previous month. The unadjusted number was 76,259, up 76.20% compared to a year before. It was an all-time record high, any way you measured it. Unadjusted annual growth also reached a new record high.
Canadian Real Estate SalesThe seasonally adjusted number of monthly home sales processed on the Canadian MLS. Source: CREA; Better Dwelling.
Canadian Real Estate Better Balanced Than A Few Months Ago
The market is still extremely tight, but a little pressure is starting to release. The sales to new listings ratio (SNLR) fell to 72.63% in March, falling closer to balanced. Inventory is still tight compared to home sales, but it’s almost half the record high of 118.53% hit in December. It may not seem that way due to the headlines on home sales, but this is a much more relaxed market. Relatively speaking, of course.
Canadian Real Estate SNLRThe sales to new listings ratio (SNLR) for Canadian real estate, both unadjusted and seasonally adjusted. Source: CREA; Better Dwelling.
Home sales are rising primarily due to pent-up and pulled-forward demand. The former is due to the restrictions on home sales, which pushed some buyers into later months. The pulled forward demand breaks down into two segments. The first is people motivated to take advantage of record low mortgage rates, and accelerating their buy. The second is people that are being driven by FOMO, and feel they need to buy ASAP, before they’re priced out of the market forever. Both of these trends happening at the same time is a once-in-a-lifetime situation. Two trends that rarely happen at once, are pushing buyers into the same small window of sales. Naturally, this is forcing a lot more competition than normal.
The same trend that caused pent-up demand also caused pent-up inventory. Selling a principal home or investment during a pandemic doesn’t strike many as ideal. This pushed many sellers to list later in the year. Combine that with more investors planning to cash in on massive price growth this year. It makes the odds of new inventory rising for a longer period than sales a lot higher. If that materializes into lower prices or just lower price growth, is another story.
Economists have been saying Canada’s hot market is not an issue of low supply. The data shows this is true, with markets being better supplied than usual. Demand-side stimulus is motivating buyers to consume any inventory — at any price though. It wouldn’t matter how much inventory came to market, an exuberant buyer is an exuberant buyer. They’ll buy it as quickly as possible, and are ready to pay as much as they can.
The market cooling on its own as the year goes on has been a popular call. The Bank of Canada (BoC) previously said they expect the market to cool in the second half of this year. A number of economists also expect the BoC to temper expectations this Wednesday. This comes after the BoC was blamed for sparking FOMO, and the Federal government said they would not let prices fall.
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