Canadian Real Estate Prices Grew At The Fastest Rate Ever As Inventory Squeeze Eased

Canadian real estate prices are seeing the rate of growth accelerate once again. The Canadian Real Estate Association (CREA) Home Price Index (HPI) shows prices surged in November. Even as the inventory squeeze eased a little, buyers bid up home prices at an even faster rate. Annual home price growth is at a record high, and it’s been accelerating.

Canadian Real Estate Prices Hit A Record High

The price of a typical, or benchmark, home across Canada has never been higher. The record composite price was $780,400 in November, an increase of 2.35% ($17,900) from the previous month. Annual growth hit a rate of 25.31% ($157,600) as well. Once again, this is a record for prices. A typical home across Canada jumping $17,900 in a month is hard to believe, but it happened. Again. Did we mention this is across Canada?

Canadian Home Prices Have Never Seen Faster Growth and It’s Accelerating

The prices aren’t the only record being set, but growth is also moving at the fastest rates in history. The monthly increase is the largest since April. Annual growth at 25.31% means a new record high for the CREA composite benchmark. Price growth hasn’t eased, it’s actually accelerating as moral hazard sets in. 

Canadian Real Estate Benchmark Change

The 12 month price in change of a typical home across Canada.

Source: CREA; Better Dwelling.

Canada Housing Inventory Is In A Squeeze As Demand Gets A Boost From Monetary Policy

If you heard home prices are rising due to a lack of inventory, you heard correctly. Well, sort of. Seasonally adjusted existing-home sales reached 54,222 units in November. This is an increase of 0.6% from a month before. Home sales are just below the record for November, set a month before.

Canadian Real Estate Sales and Inventory

The seasonally adjusted number of existing home sales and new listings of homes for sale for the month of November.

Source: CREA; Better Dwelling.

Canadian real estate inventory is rising a little faster. Seasonally adjusted new listings reached 70,406 units in November, up 3.3% from a month before. A little under the record for November, but the highest level since 2017. Inventory is tight, but that’s mostly a result of the elevated level of home sales. This is fairly typical, and even elevated, compared to the past few years. Low rates have just been incentivizing purchases much faster than listing can grow.

Canadian Home Price Growth Accelerated As Inventory Squeeze Eased (Slightly)

New listings growing faster than sales means some relief from the squeeze. Just not a substantial amount of relief, and people didn’t notice it. The sales to new listings ratio (SNLR) fell to 77% in November, down 2.1 points from the previous month. When it’s above 60% the market is considered tight, and prices are expected to grow. As inventory issues ease, homebuyers are accelerating what they’re willing to pay. 

The inventory shortage issue is looking more like an excess demand issue, suggests BMO. Inventory is relatively in line with historic levels, even showing a minor uptick. Home sales are seeing substantial motivation from cheap rates though. A bigger portion of that demand is investors, now a larger segment than first-time buyers in many regions.

Every day the economy improves and monetary policy stays at deep recession levels, which means easy money. Inflation and home prices are rising at a faster rate, even as inventory issues ease. If you think low rates are here to stay, this makes sense. A buyer in this case is also trying to spend money they think will be worth significantly less next year.