Canadian real estate sales are printing big numbers, but the market is apparently moderating. That’s the take from RBC economics, whose latest analysis shows sales slowing in April. New listings have also begun to rise, helping to ease the inventory squeeze. However, the market has yet to acknowledge this, as price growth generally accelerated.
Canadian Home Sales Are High, But Growth Is “Exaggerated”
Local real estate board data shows home resales and new listings made very large jumps in April. The RBC analysis shows the indicators increased between 140% and 462% in large markets. “But base effects vastly exaggerated these numbers,” said Hogue, the bank’s chief economist.
Base effect is when growth for a period is skewed by comparison to an unnatural previous period. Last April was the first month affected by the pandemic’s lockdown. This caused sales to come in much lower than they would have naturally. Sales last month were very high, but the year-over-year growth isn’t meaningful.
Canadian Home ResalesCanadian home resales by market, seasonally adjusted at the annual rate. Source: RBC; Better Dwelling. *seasonal adjustment is the RBC estimate, not the official data released later in the month.
“A focus on monthly (seasonally-adjusted) movements reveals signs of moderation across several housing markets in April” he said. “After soaring to outer space in prior months, home resales came down to a lower orbit—still generally strong but less excessively so—in Vancouver, Toronto and Ottawa.”
Home Price Growth Ignored Fewer Sales and More Inventory
Moderation of sales and more inventory did little to cool home price growth — for now at least. Annual HPI growth further accelerated in Canada’s largest markets in April. More inventory wasn’t noticed by pre-approved buyers, already prepared for bidding wars.
Canadian Home PricesThe annual percent change of the MLS Home Price Index. Source: RBC; Better Dwelling. *Montreal’s April HPI won’t be released until mid-month.
“Whether or not moderating in April, all major markets continued to heavily favour sellers. Inventories generally remain low (despite rising somewhat), leaving few options for buyers to fight over and fueling widespread bidding wars,” he said.
Generally, the market is still very tight. The ratios are just above balanced, indicating it’s slanted in favor of sellers. However, there’s more inventory relative to home sales. Price growth doesn’t usually accelerate as more options come to market. This is a sign the market is running on more exuberance, than reality.
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