The number of homes changing hands across Canada likely won’t rise to levels seen in March until the country’s next boom period, but there’s still plenty of gas left in the tank to keep home prices climbing.
RBC Senior Economist Robert Hogue wrote this week that even as fewer buyers are now participating in bidding wars, competition remains strong and prices will continue to surge as long as the market balance remains heavily tipped in favour of sellers.
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A “rebalancing” of the market will not happen until late 2021 at the earliest, Hogue predicted, meaning prices will not stabilize until that time or potentially sometime next year.
Citing data published this week by the Canadian Real Estate Association (CREA), the economist wrote that national home prices soared 24.4 percent annually in May, a record-breaking acceleration that topped the increase measured in April by more than a percentage point.
Home sales have been on the decline on a monthly basis since March, but new listings have been falling at the same time, preventing available supply from meaningfully catching up to still-high buyer demand.
“Low interest rates, changing housing needs and high household savings will continue to fuel demand. The bigger question is on the supply side: will more sellers step in?” Hogue wrote.
The view from the RBC Economics team is that high home prices, coupled with the successful Canadian vaccination campaign and looser restrictions, will bring more sellers to the market, many of whom may have delayed listing during the spring’s third wave.
“Still, any bump in new listings is poised to come short of rebalancing most markets in the near term. In fact, we see low inventories restraining activity in the months ahead and sustaining intense competition between buyers leading to further price gains in the coming months,” Hogue wrote.