Canadian Real Estate Association (CREA), has updated its forecast for home sale activity via the Multiple Listing Service (r) and MLS (r). Systems of Canadian real-estate boards and associations.
The past few years have seen record international immigration levels (not including 2020), low rates and a growing Millennial generation combine to drive strong housing demand and household formation in Canada. Remember that the national inventory of listings was at an all-time low of 14 years prior to COVID-19 and that the national inventory of inventory had dropped to less than 4 months on the eve the lockdowns (seller’s territory).
COVID-19 did not change the trends. First-time home buyers were more active than ever, and existing owners started to take up the reins. Everyone was trying to find the best place to survive the pandemic. Many existing homeowners who might have offered their homes for sale in a normal year just stayed put. This resulted in prices rising sharply while supply dropped further, to all-time lows. The good news is that in 2021, the frenzy and urgency have subsided and the market is now somewhat more stable.
Most housing market indicators are now at a cruising level somewhere between pre-and peak-pandemic levels. Only one exception is the inventory of properties available for sale at the end of each month, which has fallen to new lows. The market is still historically unbalanced. This could have unexpected consequences and present unprecedented risks for forecasting the number and price of sales.
While supply concerns are important, mass vaccinations and the eventual reopening and reintegration of our economies and lives, as well as the migration and international immigration, present considerable uncertainty for the future outlook. However, this is only a timing issue. These are unlikely to be a tailwind for housing demand. Canada will see record home sales in 2021. Despite the fact that 2022 will see fewer MLS (r) transactions in comparison to 2021, it is still expected to be the second-best year for Canadian home sales.
There is also the risk of the federal election, where ideas about fixing the housing market will be prominent. It is encouraging to see major parties looking for long-term solutions to the shortage of housing stock. However, this also shows that there are no quick fixes. Anyone who has attempted to complete even a small project in the past year knows that availability of skilled labour and materials are not dials that can be turned up or down whenever they are needed. There are many other obstacles to building. It may seem difficult, but it is something that we can finally start to do after a decade of demand-side tweaks. We will see what initiatives are launched after September 20.
In 2021, 656,300 properties will be traded via Canadian MLS (r-) systems. This would be a record setting number and an 18.8% increase over 2020. This forecast is a downgrade from the previous estimates. Sales fell faster than expected this spring.
CREA expects strong sales growth in all provinces except Quebec. The second half of 2020 was significantly stronger than the first five of 2021. Regardless of timing, we are far past the peak activity at this point.
CREA’s forecast for 2021 is that the national average home price will rise by 19.9% annually to $680,000. This is little different from its previous forecast. This historic increase is due to the unprecedented supply-demand imbalance, with only 2 months of inventory remaining nationally.
Sales are expected to trend back slowly towards normal levels on a monthly or quarterly basis through 2021 and 2022. However, it is possible that some of that has already occurred. In 2022, limited supply and higher prices will be the main factors in slowing activity. However, increased churn in the resale market due to the COVID-related shakeup of so many people’s lives might continue to drive activity higher than before COVID-19. It is possible that many changes associated with remote work will not be realized until we know more about the future.
The national home sales are expected to drop by 12.1% to approximately 577,000 units in 2022. This trend will continue across Canada, with buyers confronting both increased prices and limited supply. However, the need to buy a home to survive the pandemic is still strong. Despite record low supply, the national average home cost is expected to rise 5.6% annually to $718,000 by 2022.
Sandi Branker is a Real Estate agent and a Think Ely Real Estate Team member at Zolo Ottawa. She can be reached at (613) 408–7935 or by email at email@example.com. Facebook| Google My Business |Website Home Page |