- Steve Huebl
National average home price rises $50k in February
On a non-seasonally adjusted basis, home prices registered their first monthly rise in six months, jumping over $50,000 to $635,000.
But compared to a year ago—the peak of the Canadian real estate market—prices remain lower by nearly 19%.
The MLS Home Price Index, which accounts for market composition, posted another monthly decline of 1.1%, putting its annual change now at -15.8%.
CREA also reported a 2.3% month-over-month rise in home sales in February, marking the third monthly increase in the past five months.
On a year-over-year basis, sales were down a whopping 40%.
“The similarities between 2023 and the recovery year of 2019 continued to emerge in February, with sales up, the market tightening, and month-over-month price declines getting smaller,” said Shaun Cathcart, CREA’s Senior Economist.
But he noted the biggest similarity was the sharp drop in seasonally adjusted new listings, which were down 7.9% on a monthly basis, led by double-digit declines in Ontario.
“Future sellers, many of whom will also be buyers, are likely biding their time until the optimum time to list and buy something else,” Cathcart added. “For most, that’s in the spring. Will buyers jump off the fence to snap homes up in 2023 once they finally start to hit the market? They did in 2019.”
With new listings falling and sales rising, the sales-to-new-listings ratio jumped from 52.6% to 58.4%, three points above its long-term average, CREA said.
Inventories also tightened for the first time since last April, with the number of months of inventory falling to 4.1 from 4.2 in January. “Hints of a bottoming” seen in February data
Despite Canadian housing still “deep in the doldrums” in February, BMO Chief Economist Douglas Porter says the data points to “hints of a bottoming process.”
He also said the recent financial sector turmoil could turn out to be a “potentially positive” factor for the housing market. Long-term borrowing costs have plummeted, with bond yields testing levels from about seven months ago when the Bank of Canada benchmark rate was 200 basis points lower, Porter noted.
“While the broader turmoil is a clear negative for the overall economic outlook, the Canadian housing market dances to the tune of interest rates first and foremost,” he said. “The pullback in long-term yields, along with the BoC’s rate pause, may at least put a floor under housing.”
The Canada Mortgage and Housing Corporation (CMHC) also released housing starts data, which showed a surprise 13% jump to 244,000 units in February.
Randall Bartlett, Senior Director of Canadian Economics, said the February data may have some housing bears “scratching their heads.” But he pointed out the housing starts gains were concentrated in the volatile multi‑unit segment, meaning “February’s fillip could be March’s flop.”
“As such, it’s probably too early to bet that residential construction is at a turning point,” he wrote in a research note.
“That said, we expect sales activity to find a bottom in the middle part of this year, particularly if some of the recent decline in yields is sustained,” he added. “A sustained upswing in prices and starts shouldn’t be far behind.”
Steve Huebl Real Estate March 15, 2023