Canadian Existing Home Sales (December 2021)

Rishi Sondhi, Economist | 416-983-8806

Date Published: January 17, 2022

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Canadian housing markets remained hot at the end of last year 

  • Canadian existing home sales edged even higher in December, rising 0.2% m/m to 54.4k units. This marks the highest level of activity since May 2021.
  • Sales were up in four of 10 provinces. Alberta (sales up 5.0% m/m), made the largest contribution to the national increase, but sales were also higher in Ontario (+1.1% m/m), Newfoundland and Labrador (+7.1% m/m) and Manitoba (+2.1% m/m). On the flipside, Saskatchewan (-17.5% m/m) and B.C. (-2.4% m/m), posed the largest drags.
  • New listings declined 3.2% m/m in December. With listings declining and sales creeping modestly higher, the sales-to-listings ratio tightened to 79.7% compared to 77% in November. There were only 1.6 months of inventory available nationally in December, the lowest level on record. In comparison, the long-term average for this measure is slightly higher than 5 months.
  • Canadian average home prices increased 1.5% month-on-month in December. The expensive markets did much of the heavy lifting, with prices up 2.4% m/m in B.C. and 1.9% m/m in Ontario. Meanwhile, they increased by 1.4% m/m in Quebec. In contrast, prices edged lower in Alberta (-0.6% m/m). That said, the housing market is extremely tight in Alberta, which should support rising prices moving forward.
  • The MLS home price index, a more "like for like" measure, increased at a heated 2.5% m/m clip. Single family home prices advanced 2.6% m/m, and have grown rapidly since October. Meanwhile, apartment prices rose by a similarly robust 2.1% m/m. Prices are frothy when measured in year-on-year terms. Detached prices accelerated to a 28.5% gain last month, while condo prices were up 20.1%.    

Key Implications

  • Buyers pulling forward demand ahead of looming interest rate hikes kept sales at unsustainable levels last month. How long this effect will last is uncertain, but it should eventually fade. With interest rates set to climb, we look for some froth to come out of sales activity this year. However, solid macro conditions, coupled with a highly-elevated price backdrop (which is likely causing buyers to act now  rather than later), should sustain sales above pre-pandemic levels. 
  • Listings have not kept pace with sales. In fact, the number of homes newly listed last year was below levels that generally prevailed before the pandemic struck. It could be that a lack of supply is perpetuating itself, in that potential sellers who would be more active in "normal" times are holding back their listings due to a dearth of inventory to relocate to, and intense competition for available properties.
  • With interest-rate pull-forward behaviour keeping demand so strong, and supply struggling to keep up, its little wonder why prices are continuing their relentless upward march. However, while prices will likely increase this year, higher interest rates should slow the rate of increase. Notably, investor activity is climbing and these buyers are likely more sensitive to higher rates.