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Spring is heading our way and home buyers are already jumping on the first listings to hit the market as prices soar to a new record, the Canadian Real Estate Association (CREA) says.
In its latest monthly market report, CREA said that national home sales increased during February as purchasers scooped up the first round of springtime listings. The monthly rise in sales activity was attributed to rebounding listing levels last month following a drop in January’s home supply.
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“As expected, after a bit of a lull in January, we saw the first batch of spring 2022 listings come to market in February, and they were quickly scooped up by buyers,” said Cliff Stevenson, chair of CREA, in the report. “It’s unclear if this is the beginning of a re-emergence of some of the many would-be sellers who have been dormant for the last two years, or if the supply will fade towards the summer like it did in 2021.”
Here’s what we know based on the latest from CREA.
Sales down from 2021 record, but up from January
Between January and February, national home sales recorded over Canada’s MLS jumped 4.6 per cent, a likely response to an increase in new listings last month.
“As such, stronger activity may persist as late-February new listings continue to sell in March,” said the market report.
The actual — not seasonally adjusted — number of transactions recorded in February was 8.2 per cent below the monthly record set in 2021, but still marks the second-highest level on record for February.
Sales grew in 60 per cent of local markets last month as a result of gains recorded in Calgary, Edmonton and the Greater Toronto Area.
February inventory supply ties with record-low levels
The number of new listings hitting the market last month was on an upswing.
In February, newly-listed homes rebounded 23.7 per cent month-to-month following a 10.8 per cent drop in January. New housing supply increases last month were largely thanks to inventory growth in the GTA, Calgary and the Fraser Valley.
“New supply bounced way up in February, which is similar to what we saw play out in 2020 and again in 2021. The real question is what comes next?” said CREA’s senior economist, Shaun Cathcart, in the report.
“In the short term, expect at least one more month of stronger sales as the majority of those new listings came onto the market near the end of the month so many of the associated sales likely won’t happen until early March. Ideally, listings will continue to come out in big numbers in the months ahead,” he added.
The sales-to-new listings ratio dropped to 75.3 per cent, having soared to 89 per cent in January. Still, two-thirds of local markets were seller’s markets based on this ratio, while the other third was in balanced market territory.
By the end of February, there was 1.6 months worth of inventory available nationwide, a tie with January and December 2021 for the lowest inventory level ever.
National average price hits record $816,720
The aggregate Composite MLS Home Price Index (HPI) was up by a record 3.5 per cent monthly in February. Meanwhile, the non-seasonally adjusted Aggregate Composite MLS HPI increased by a record 29.2 per cent yearly last month.
The actual — not seasonally adjusted — national average home price reached a record $816,720 in February, a 20.6 per cent increase from February 2021. When subtracting Greater Vancouver and the GTA from the equation, the national average price drops approximately $178,000 to $638,720.
“Combined with higher interest rates and higher prices, we could be at a turning point where price growth begins to slow down and inventories finally begin to recover after seven years of declines,” explained Cathcart. “Still, in order to turn this market back towards balance long-term, building more new homes across the spectrum remains the key.”
CREA revises 2022 forecast, sets projections for 2023
In a separate report, CREA updated its forecast for home sales activity based on influences from higher interest rates, inflation and home supply.
The company’s latest forecast projects that 612,800 properties will be exchanged over the MLS this year, a 8.1 per cent decrease from 2021, but still the second-highest annual figure on record. CREA noted that this forecast is “basically the same as it was in the December 2021 forecast,” but accounts for downward revisions in several provinces.
The national average home price is now expected to grow 14.3 per cent annually to $786,000 in 2022, higher than initially projected thanks to an “unprecedented imbalance of housing supply and demand.”
Heading into 2023, home sales are anticipated to stay strong as limited supply in addition to higher prices and interest rates slows things down. Next year, national home sales are projected to edge back another 2.7 per cent to 596,150 units, the third-best year on record.
Property prices in 2023 are predicted to grow 3.2 per cent yearly to a little under $811,000.