OTTAWA — Real estate agents across the country saw home sales in June nearing or even beating pre-pandemic levels.
The question is whether strong summer sales — driven in part by delayed purchasers waiting to buy since spring's lockdown — will carry forward to fall, experts said.
The Canadian Real Estate Association on Wednesday reported that June sales were up 63 per cent on a month-over-month basis, and 15.2 per cent higher than the same time last year. Prices also rose from June 2019, up 6.5 per cent to an average $539,000.
"Home sales, prices and starts have effectively regained all the ground lost during the shutdown," BMO chief economist Douglas Porter wrote in a note to clients.
"However, fair point that some of this outsized strength is simply pent-up demand for the lost sales from the key spring season."
The real estate industry came to a near standstill earlier this year as non-essential businesses closed to help slow the spread of the COVID-19 pandemic. CREA said the jump in sales returned them to "normal levels" for June, noting they were up 150 per cent from where they were in April.
Porter said the housing market now must keep up its momentum headed into autumn. Though at a glance, the numbers appear to suggest nothing "amiss in the economy whatsoever," the market will have to balance slowing immigration levels, low interest rates and short housing supply, he said in the note. This tension will come with lasting scars, he said.
Also on Wednesday, the Bank of Canada released its quarterly outlook, forecasting an uncertain economic recovery ahead, and suggesting housing activity will slow over the next few years.
Royal LePage CEO Phil Soper said that the "pent-up demand" in the market has been boosted by first-time homebuyers looking for bargains during the downturn. That can crunch the number of new listings, since first-time owners don't have a home to sell, he said, noting CREA's data showed housing inventory at a 16-year low. The association said that the number of newly listed properties climbed 49.5 per cent from May to June.
If there are too many home buyers and too few listings available, that can drive up prices, said Soper. Soper predicts that more existing homeowners may list their homes in the fall, which may cause price increases to level off.
"We're seeing upward pressure on prices, and the highest levels of demand in Ontario and Quebec," said Soper. "Things are good in other parts of the country, but they're quite calm, where the number of people looking for homes and the number of homes available for sale are roughly equal."
Sherry Cooper, chief economist at Dominion Lending Centres, said in a client note that home prices are declining in Calgary, while elsewhere on the prairies, prices are either flat or rising.
Tim Otitoju, a Regina, Sask.-based real estate agent and chairperson of the province's real estate association, said that while the supply of homes for sale is steady and a bit low, sellers are getting more comfortable with the provincial measures to re-open business.
"We saw a surge in demand in June — we are actually attributing that to the buyers that held off during the shutdown," said Otitoju. "It seems that buyers and sellers are showing a lot of confidence in the provincial reopening plan. Sellers are starting to put their houses back on the market."
Soper said that he was reassured by the recovery in the West, given oil price volatility and regulatory changes in British Columbia. If immigration does slow, said Soper, it may be a few years before the long-term impacts surface, since homeownership for new Canadians spikes between three and seven years after arrival.
While home sales may be hitting "normal levels," the overall housing market is "obviously not back to normal at this point," said Shaun Cathcart, CREA's senior economist.
"The market has recovered much faster than many would have thought, but what happens later this year remains a big question mark," said Cathcart in a statement.
"That said, daily tracking suggests that July, at least, will be even stronger."
This report by The Canadian Press was first published July 15, 2020.