The Canadian real estate market was in good shape heading into 2020, but the busy spring season was delayed a bit thanks to COVID-19. The good news is that it has come back white hot, breaking records throughout the summer and showing no signs of slowing down anytime soon.
Historically low interest rates have also paved the way for many first-time homebuyers who were sitting on the fence about making a purchase. And the Bank of Canada doesn’t see rates rising in the foreseeable future. This is great news for both buyers and existing homeowners who are looking to tap into home equity through a refinance to consolidate debt, free up cash flow, make renovations, buy another property or send kids to school.
In its August market update, RBC Economics said it sees nothing to indicate that home prices will fall anytime soon. The report came out on the same day that the Canadian Real Estate Association (CREA) reported that July 2020 home sales posted the highest record in history.
Market update highlights
- Home resales surpassed pre-COVID levels… by a mile: Activity surged 26% month over month (and 30.5% year over year) across Canada to a new all-time high of 637,000 units (annualized) in July. Virtually all local markets recorded strong increases – albeit from weak levels in June – fueled in large part by pent-up demand created by COVID-19 lockdowns this spring
- Demand-supply conditions the tightest in almost two decades: Buyers far exceeded sellers last month. The sales-to-new listings ratio jumped to 0.74 Canada-wide – the highest it has been in 18 years. If sustained at this level, it would signal intense upward pressure on prices. Sellers were firmly in control in almost all markets east of Saskatchewan. Supply was especially low relative to demand in Ontario and Quebec
- Prices heating up: Canada’s MLS Home Price Index (HPI) rose 7.4% year over year – the fastest rate of increase in more than 30 months. Ottawa (up 18.4%) and Montreal (up 14.1%) continued to lead the country though most of southern Ontario, including the Greater Toronto Area, narrowed the gap with double-digit increases. Calgary (-1.4%) and Edmonton (-1.2) are the only major markets where the MLS HPI is still down relative to a year ago
- COVID-19 turned seasonal patterns upside down: The pandemic muted this year’s spring market and shifted activity into the summer, a traditionally slower period. We expect further unwinding of pent-up demand to keep sales brisk in August and perhaps September before cooling later this year
Have questions about whether now is the right time for you to buy, or concerning your mortgage in general? Answers are a call or email away!