With housing inventory still at historic lows, home prices surged to a fresh record high in January.
The average selling price in January reached $748,450, which is 1% higher from December and 21% higher compared to a year ago, according to data from the Canadian Real Estate Association (CREA).
Compared to pre-pandemic levels in January 2020, the MLS Home Price Index is now up a whopping 46.5%.
Home sales were up slightly from a month ago at 55,043 sales, though that’s down nearly 11% from year-ago levels.
CREA says a lack of new inventory is continuing to put upward pressure on prices.
The number of months of inventory remained at its all-time low of 1.6 months, well below the longer-term average of five months.
“The ideal situation between now and the summer would be that a huge surge of sellers come forward looking to sell in the spring 2022 market,” said Shaun Cathcart, senior economist at CREA. “If that were to occur, similar to 2021, we’d likely see a massive number of sales take place, which would get a lot of frustrated buyers into homeownership, and we’d likely see some cooling off on the price growth side if those offers are spread across more listings.”
Removing the high-priced markets of the Greater Toronto and Vancouver areas, the average price stands at $588,450, which is $95,925 higher than a year ago.
Cross-Country Roundup of Home Prices
Prices are continuing to soar in many markets across the country. In just the past month alone, average prices have risen by $51,900 in the Greater Toronto Area, $44,100 in Barrie, ON and district, $25,000 in Greater Vancouver Area, $12,300 in Greater Montreal and $7,600 in Calgary.
Here’s a look at some more regional and local housing market results for January:
- Ontario: $998,629 (+25.6%)
- Quebec: $474,941 (+16.3)
- B.C.: $1,040,888 (+23.3%)
- Alberta: $443,398 (+10%)
- Barrie & District: $880,300 (+39.3%)
- Greater Toronto Area: $1,259,900 (+33.1%)
- Halifax-Dartmouth: $560,237 (+29.7%)
- Victoria: $920,400 (+24.9%)
- Greater Montreal Area: $530,100 (+22%)
- Greater Vancouver Area: $1,255,200 (+18.5%)
- Ottawa: $689,700 (+16%)
- Winnipeg: $331,300 (+13%)
- Calgary: $458,800 (+11.4%)
- St. John’s: $291,300 (+10.2%)
- Edmonton: $339,600 (+5.2%)
Other factors at play
It’s clear now that housing inventory isn’t keeping up with demand by a long shot. But what other factors are there to considerthat may influence home prices going forward? Here are a few…
Falling housing starts:
With inventory already at historically low levels, a decline in housing starts is probably the last thing housing markets need right now. Yet, Canada’s housing regulator, the Canada Mortgage and Housing Corporation (CMHC), reported that housing starts fell to 230,743 units in January, a 15-month low. Urban starts were down roughly 5% in the month, while starts for apartments, condos and other multi-unit housing were down 9%.
Rising immigration (aka housing demand):
These figures come as the Liberal government unveiled an ambitious immigration plan to grow the country’s labour force by welcoming more than 1.3 million immigrants over the next three years. For 2022, the government has increased its immigration target to almost 432,000 new immigrants, up from an initial estimate of 411,000 newcomers.
The need for higher interest rates:
Markets had largely expected the Bank of Canada to hike interest rates at its last meeting in January. Having decided to kick the can further down the road, many are now saying larger-scale hikes will be needed to have any impact on housing demand.
“We have a fundamentally-strong housing market that has been allowed to overheat by too-loose policy,” wrote BMO economist Robert Kavcic. “It’s going to take higher interest rates to alter the market psychology, cool excess demand and price growth. That day is fast approaching.”