Strong June home sales data from Toronto and Vancouver finally gave wary homebuyers and industry professionals the dose of good news that they’d sorely needed.
Toronto home sales last month were up 84 percent from May and down only 1.4 percent from where they were in June 2019. In Vancouver, sales rose nearly 60 percent from May and were even up over 17 percent from a year ago.
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In a note published this week, RBC Senior Economist Robert Hogue said pent-up demand from April and May was unleashed last month, with both buyers and sellers returning to the market as restrictions relaxed and businesses began to reopen.
The recovery momentum seen in June’s sales figures may not last though, as the pandemic’s negative economic impacts linger well into the future. Hogue said there’s likely enough pent-up demand to fuel strong sales activity through the summer months, but the outlook dampens as we move into the fall.
“We believe the rundown of pent-up demand could play out for another month or two but expect high unemployment will restrain demand thereafter,” wrote Hogue.
“The expiry of mortgage payment deferrals and the possible phasing out of government support programs (including CERB) later this year could prompt some financially strained owners to sell their property. Any material rise in supply would soften price support,” he continued.
While Hogue doesn’t believe the market is “out of the woods just yet,” the sales rebound seen in June does reduce the probability of a worst-case scenario playing out in Canadian housing.
As the pandemic took its toll through the spring, the RBC economist has maintained that home prices will likely fall in late 2020 and through 2021, but the market will avoid an all-out price collapse and the broader economy will not be significantly weighed down by the housing sector.
On a local level, Hogue said this week that support for Toronto home price growth will erode later this year while conditions in Vancouver are supportive of only “modest” price increases.
When publishing its June sales and price data earlier this week, the Toronto Regional Real Estate Board (TRREB) delivered a more optimistic outlook for the remainder of the year and 2021.
“A gradually improving labour market and historically low mortgage rates are expected to support a recovery in home sales in the second half of 2020 along with sustained year-over-year price growth,” said Jason Mercer, TRREB’s Chief Market Analyst.
“Given that home sales result in substantial spin-off expenditure in the regional economy, the housing market will be an important driver of overall economic recovery this year and into 2021,” he added.
But even Mercer’s outlook came with some important caveats — namely, that the continued positive market trend hinges on the economy reopening further, with employment improving and borrowing costs remaining low.
A surge in new COVID-19 cases locally and potential negative economic impacts of the situation in the US could knock the wind out of the market recovery, according to TRREB.