January Supply Shortage Continues to Drive National Home Prices: CREA

January Supply Shortage Continues to Drive National Home Prices: CREA

 

 

By: Zoocasa

 

The Canadian housing market continues to experience a widening supply and demand gap as January 2020 data showed a decline in sales on a month-over-month basis.

 

According to the latest data report from the Canadian Real Estate Association (CREA), last month marked the best sales figures for January in 12 years. Sales activity grew 11.5% in comparison to January 2019 and the national average sale price rose 11.2% year over year.

 

An Ongoing Lack of Supply Leads to Short Term Sales Dip

 

Despite having recorded the best numbers for January in over a decade, however, home sales across the nation fell 2.9% month over month. The lack of supply continues to affect home buyers as an increasing number look to re-enter the market in the upcoming months.

Ontario real estate in particular continues to show steady home price growth “in housing markets where listings are short in supply, particularly in Southern, Central, and Eastern Ontario,” said Jason Stephen, president of CREA. “Meanwhile, ample supply across the Prairies and in Newfoundland and Labrador is resulting in ongoing competition among sellers.” The number of months of inventory in the Prairies and Newfoundland and Labrador gives home buyers in these areas an abundance of choices.

 

This lack of supply to start off the year in most Canadian markets could be attributed to a common seller’s mentality, suggests Shaun Cathcart, CREA’s senior economist. He states, “Looking at local market trends across the country, one thing that stands out in markets with historically tight supply is a larger than normal drop in new listings at this time of year. The logic being that if you are a seller, you’re not just choosing when to list but effectively when to sell, so why not hold off until spring when the weather is better, and more buyers are looking?”

He adds that, “Deferred listings mean deferred sales, which could explain some of January’s decline in activity. The question going forward is how many sellers are out there waiting to list their property, how much demand will respond, and how that will impact prices alter this year.”

 

Market Trends Continue to Favour Sellers

 

Given the decrease in sales and the slight increase in new listings at a mere 0.2%, Canada’s sales-to-new-listings ratio (SNLR) fell to 65.1% compared to the month prior at 67.2%. Although, regardless of the slight dip in the SNLR, it continues to be significantly above the nation’s measure of a balanced housing market. January 2020 showed most local markets were within balanced market territory with the remainder favouring sellers, aside from a couple of neighbourhoods in Saskatchewan and Alberta. With that being said, the report states that “barring an unforeseen change in recent trends between the balance of supply and demand for homes, price gains appear poised to accelerate in 2020.”

 

Home Prices on the Rise Again

 

Home price trends in Canada’s most expensive housing markets continue to rise, especially in Ontario’s Greater Golden Horseshoe, including Guelph homes for sale, and British Columbia. Sales in both the Greater Vancouver Area and the Greater Toronto Area have been heavily influencing the national average price.

 

Taking a look at specific home types, apartment unit prices displayed the largest year-over-year increase at 5% and two-storey single family homes at 4.8%. One-storey single-family homes and townhouse/row units were not far behind with year-over-year increases of 4.4% and 4.2%, respectively.

 

The report stated that “the actual national average price for homes sold in January 2020 was around $504,350, up 11.2% from the same month the previous year. This was the largest increase since mid-2016.”

 

For more information on the Canadian housing market in January, check out the infographic above: