Canadian Existing Home Sales (March 2021)

Rishi Sondhi, Economist | 416-983-8806

Date Published: April 15, 2021

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Another strong month for Canadian home sales in March

  • In March, Canadian existing home sales rose by 5.2% month-on-month, bringing them up a towering 76.2% year-over-year.
  • Sales rose in nearly every province, led by Saskatchewan (+11.1% m/m), New Brunswick (+9.4% m/m) and Alberta (+8.4% m/m). The only decline occurred in Quebec (-5.3% m/m).
  • New listings increased 7.5% m/m. However, markets remain historically tight. The comparatively stronger gain in new listings brought the sales-to-new listings ratio lower to 80.5% – still deeply entrenched in sellers' territory. Meanwhile, the months' supply of inventory dipped to 1.7 months – the lowest on record. 
  • Canadian average home prices were up 4.4% month-on-month, bringing them a sizzling 31.6% higher year-on-year. Annual growth in home prices was above 20% in six provinces, with strong gains across most of the Atlantic Region and Quebec (where prices advanced 27.9% y/y). In Ontario, year-over-year price growth came in at 29.9%. 
  • The MLS home price index, a more "like for like" measure when compared to the average home price, increased by 3.0% m/m. Single family home prices surged 3.5% m/m (and a robust 25.4% y/y). Apartment prices rose by 2.0% m/m – the strongest monthly gain since 2017. However, apartment prices are much more well-behaved, with the benchmark price up 5.4% y/y. 

Key Implications

  • It's déjà vu all over again. March was yet another hot month for Canadian home sales and prices, as the recent uptrend in interest rates (to still low levels) wasn't enough to derail momentum. On an annual basis, prices grew at the fastest pace in the history of the data – spanning all the way back to 1980. And, with markets remaining historically tight, more near-term gains are in the cards. This frothy price backdrop could prompt a response from policymakers in coming months.     
  • However, even absent macroprudential measures, we think current sales levels are unsustainable. Accordingly, we anticipate some cooling in sales starting in the second half of the year, as rising interest rates begin to bite. This should also sap some steam from price growth. 
  • April and May are shaping up to be interesting months. On the one hand, the prospect of a stricter stress test on uninsured mortgages starting in June could prompt some pull forward of sales (see report), supporting demand and prices. On the other, the third wave of the pandemic (and its more severe outcomes for younger people), could weigh on activity.