“Remarkable” and “stunning” are two terms that have come up often when describing the rate of recovery observed in both the Toronto and Vancouver housing markets this summer.
The two markets have seen a reversal of fortunes that have apparently given many market commentators whiplash, especially after July saw Toronto home sales break records and Vancouver sales surge over 22 percent compared to the previous year.
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Central 1 Credit Union is the latest in a chorus of market experts that have expressed a high degree of astonishment at the strength of the two major markets’ performances.
In a note published late last week, Central 1 Deputy Chief Economist Bryan Yu described the thirst for real estate in the Vancouver region as “unquenchable despite households still navigating a pandemic driven economic and labour market downturn.”
While Yu acknowledged the role that pent-up demand from the almost non-existent spring market played in the strong summer performance, he remained surprised at the scale of the recovery with all the factors still theoretically weighing on the market.
Rock bottom mortgage rates and the fact that job losses have been less acutely felt in higher income occupations are major contributors to the speed and strength of the recovery, wrote Yu.
“The pandemic may also be driving a shift in mindset of buyers as they reallocate expenditures associated with recreation and tourism to housing, and work-from-home may be pushing households to search for additional space,” he added.
This rise in demand accelerated home price growth in the Vancouver region. The average home price rose to $960,850 in July, up 9.1 percent from the previous year and over three percentage points higher than the increase observed in June.
Over in Toronto, Central 1 Region Economist Edgard Navarrete described the market as “on a tear” since May’s economic restart. Beyond the low mortgage rates that are reeling buyers in, Navarrete said that households unaffected by pandemic-related income loss are likely motivated by feeling some “fear of missing out” on the latest Toronto home buying frenzy.
The economist pointed out that Toronto had moved back into seller’s market territory when it came to the sales-to-new-listings ratio in July. A ratio reading over 60 percent is generally considered to indicate a seller’s market. Last month it jumped from 56.8 percent — a balanced market — to 60.7 percent.
“From March to June the market was balanced and now has returned to a sellers’ market, the same territory it occupied in February before Ontario went into near lockdown with only essential businesses allowed to remain open,” wrote Navarrete.
Bidding wars are commonplace again in the Toronto market and the average selling price has jumped to $961,453 in July, a 6.6 percent month-over-month increase.
The economist ended his commentary on a cautionary note, writing that the momentum may not be sustained through the fall and winter as second waves of infection threaten the progress Canada has made to contain the virus threat. He also said employment and wage growth concerns still figure prominently into the downside risks weighing on the economy.
“Buyers looking to purchase should be cautious not to bite more than they can chew even if faced with today’s attractive mortgage rates,” wrote Navarrete.