Both Canadian home sales and prices continued their historic run in February, with a record number of properties changing hands while the average price of a home rose to an all-time high of $678,091 last month.
The February data, released yesterday by the Canadian Real Estate Association (CREA), is just another entry in a now eight-month streak of record-breaking sales activity and head-spinning price gains.
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And, according to Scotiabank Economist Farah Omran, we can expect more of these strong performances in the coming months.
Despite the lockdown measures in place in many regions across the country, Omran wrote in a recent research note that the “stronger-than-expected trend” in the Canadian housing market carried over from 2020 and into 2021.
Exceptionally high buyer demand — driven by low mortgage rates, changing housing preferences and high household savings — was met with much lower levels of supply through the second half of 2020, leading to soaring home prices, especially in the single-family market segment. This dynamic has continued to impact the market in early 2021.
“With the Canadian housing market still showing signs of significant undersupply, we are likely to continue to see even further price gains in the months ahead,” wrote Omran.
But a shift could be coming later this year.
Omran believes that a strong economic recovery will keep buyer demand high, but these improved conditions will also motivate home sellers to list their properties while giving home construction a boost on the new construction side of the market. This, according to Omran, should ease “the present supply-demand tightness” that’s been driving rapid home price appreciation.
Recent commentary from TD Economist Ksenia Bushmeneva generally aligned with the Scotiabank outlook on home prices eventually moderating this year.
“Historically tight supply of houses on the market will continue to push prices higher in the near-term,” Bushmeneva wrote.
“However, home price growth is expected to moderate in the second half of this year, as prospective sellers become more comfortable listing amid accelerating vaccination pace and buyers shift their attention to more affordable options,” she continued.