Canadian Existing Home Sales (September 2020)

Rishi Sondhi, Economist | 416-983-8806

Date Published: October 15, 2020

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Home sales and prices set records in September while markets tighten significantly

  • Canadian home sales rose 0.9% month-on-month in September, achieving yet another all-time sales record and pushing them more than 20% above their pre-pandemic level. Canadian average home prices also set a record in September, edging 0.4% higher to an all-time high of $604,000.
  • Sales activity was mixed across provinces, with the strongest gains observed in B.C. (+8.0% m/m) and Alberta (+5.7% m/m). In contrast, relatively steep declines were recorded in PEI (-12.2% m/m) and Manitoba (-7.2% m/m). Meanwhile, activity was flat in Ontario.
  • New listings pulled back by 10.2% during September, almost fully reversing August's robust gain. As a result, the national sales-to-new listings ratio registered a drum-tight reading of 77.2 – the third highest reading in the history of the series. Almost every province was in sellers' territory in September, highlighted by New Brunswick (ratio at 87.07), Quebec (84.6), Nova Scotia (81.73) and B.C. (80.3). Elsewhere, Ontario's ratio stood at 79.1. The only provinces not to breach the sellers' territory threshold were Saskatchewan (58.8) and Newfoundland and Labrador (53.75).
  • Average prices rose 0.4% m/m in September (or +17.5% year-on-year). The strongest gains were reserved for the Atlantic Provinces, capped by a 14.2% m/m gain in New Brunswick. A relatively strong gain was also recorded in B.C. (+2.4% m/m). In contrast, Ontario was the only province to see prices drop (-1.7% m/m). Within Ontario, prices declined 3.4% in Toronto amid slower sales growth in semi-detached units (which are relatively expensive).
  • The sales mix played a role in shaping average prices in September. Indeed, compared with the average sale price, the MLS home price index, a more "like for like" measure, was up a stronger 1.3% month-on-month. Single family home prices rose 1.6% (12.0% y/y), whereas apartment (condo) prices rose 0.4% month-on-month (6.2% y/y). 

Key Implications

  • Canadian resale housing markets defied gravity again in September, with sales pushing even further past their pre-pandemic levels. September also marked the third straight month of record sales activity. Several factors explain the stunning strength in sales observed in recent months, including low borrowing costs, the relative mix of employment/income losses, and the release of pent-up demand after a muted spring selling season. 
  • The question now becomes whether this momentum is sustainable. In our view, home sales are set to cool from their unsustainable third quarter pace over the next few quarters. Regarding prices, we think they'll hold up at these record levels in the fourth quarter, a view given credence by the fact that markets were the tightest they've been in nearly 20 years in September. However, some easing is anticipated thereafter, reflecting intensifying affordability challenges. 
     

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