Residential Market Commentary - Tight market to persist
Canada’s re-sale housing market got a little love in January according to statistics released by the Canadian Real Estate Association on Valentine’s Day.
Sales activity was up 11.5% compared to January 2019 and prices climbed by 11.2% from a year ago. It was the best January for sales in 12 years, despite a 2.9% dip from December.
Winter is a notoriously tricky time to gauge the market. Low volumes mean small anomalies or bad weather can have an outsized influence on the numbers. But market watchers, including CREA, are shaking off the month-over-month decline and taking a closer look at other factors.
The number of new listings for January was virtually flat; up just 0.2% over December. It’s a very small increase following several months of decline. The sales-to-new-listings ratio is now 65.1%. That is two full points lower than a year earlier, but it is significantly higher than the long-term average of 53.8%, and it has been for the past four months. The national housing inventory is pegged at 4.2 months, a full month below the long-term average.
CREA and others expect market tightening to persist and translate into renewed price acceleration. The MLS Home Price Index climbed 4.7% y-o-y in January. Most markets saw increases – several in, or near, double digits – but the prairies and Newfoundland and Labrador are exceptions.
It is also expected that tight market conditions will persist, tilting the balance in favour of sellers. Population growth, wage growth and low unemployment are all factors that promote increasing demand, while supply remains relatively low.