Canadian Home Sales and Listings Post Record Declines in April 2020 

Statistics released on May 15 by the Canadian Real Estate Association (CREA) show national home sales and new listings fell by more than half in April 2020 compared to March.

Highlights:

  • National home sales fell 56.8% on a month-over-month (m-o-m) basis in April.
  • Actual (not seasonally adjusted) activity was down a similar 57.6% year-over-year (y-o-y).
  • The number of newly listed properties decreased 55.7% from March to April.
  • There were 9.2 months of inventory on a national basis at the end of April 2020, up from 4.3 months in March. 
  • The MLS® Home Price Index (HPI) edged back 0.6% m-o-m but was still up 6.4% y-o-y.
  • The actual (not seasonally adjusted) national average sale price fell 1.3% y-o-y.

Home sales recorded over Canadian MLS® Systems dropped by a record 56.8% in April 2020 compared to an already weakened March, with a majority of sellers and buyers having seemingly moved off to the sidelines during the COVID-19 lockdown. Transactions were down on a m-o-m basis across the country. Among Canada’s largest markets, sales fell by 66.2% in the Greater Toronto Area (GTA), 64.4% in Montreal, 57.9% in Greater Vancouver, 54.8% in the Fraser Valley, 53.1% in Calgary, 46.6% in Edmonton, 42% in Winnipeg, 59.8% in Hamilton-Burlington and 51.5% in Ottawa. Actual (not seasonally adjusted) sales activity dropped by 57.6% on a y-o-y basis, marking the lowest April sales figure since 1984. Similar to the m-o-m changes above, declines in the biggest markets were clustered in the 55%-70% range.

“Never in our recent history have we dealt with such widespread effects of a pandemic that limit everyone’s day to day life and have forced all of us to pivot and adjust to our new reality,” said Costa Poulopoulos, Chair of CREA. “REALTORS® across the country continue to comply with all government directives and advice to keep their clients safe. We’ve adopted new technologies allowing us to continue showing properties virtually as well as completing all necessary documents,” continued Poulopoulos.“ Shaun Cathcart, CREA’s Senior Economist said that “… preliminary data for May suggest things may have already started to pick up a bit for both sales and new listings, in line with evidence that new and existing virtual technology tools have been adopted by REALTORS® and their clients. These tools have allowed quite a bit of essential business to safely continue, and will likely remain key for some time.”

The number of months of inventory is another important measure of the balance between sales and the supply of listings. It represents how long it would take to liquidate current inventories at the current rate of sales activity.There were 9.2 months of inventory on a national basis at the end of April 2020, up from 4.3 months in March. Anecdotal evidence suggests many sellers who already had homes on the market before mid-March may have left the listings up for now but drastically curtailed the extent to which they were actively trying to sell during the lockdown. Going forward, many of these listings will simply be allowed to expire or may be withdrawn. As such, we may see this measure of market balance head back down in the months ahead.

The Aggregate Composite MLS® Home Price Index (MLS® HPI) declined by 0.6% in April 2020 compared to March, the first decline since last May. While some downward pressure on prices is to be expected, the comparatively small change underscores the extent to which the bigger picture is one where so much activity on both the selling and buying side is currently on pause.

Prices were flat or down in a majority of markets in April compared to March.The MLS® HPI provides the best way to gauge price trends because averages are strongly distorted by changes in the mix of sales activity from one month to the next. The actual (not seasonally adjusted) national average price for homes sold in April 2020 was just over $488,000, down 1.3% from the same month the previous year. The national average price is heavily influenced by sales in Greater Vancouver and the GTA. Excluding these two markets from calculations cuts almost $100,000 from the national average price, trimming it to less than $392,000.

Source: CREA


Housing Construction Surprisingly up in April Compared to Previous Month 

Housing starts in Canada surprisingly rose in April when excluding Quebec, where residential construction was temporarily paused because of the COVID-19 pandemic, new figures show. The results of a monthly survey, compiled by the Canada Mortgage and Housing Corporation (CMHC), suggests there that 155,995 new housing projects got underway in April, a small increase from the 153,463 units recorded in March. Including Quebec, 199,589 units started construction in April 2020, a small drop from the 204,899 starts in March 2020. This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts, according to the CMHC, a federal Crown corporation.

“Outside of Quebec, the national trend in housing starts increased in April, despite the impact of COVID-19 containment measures,” Bob Dugan, CMHC’s chief economist, said in a statement. “This reflects strong growth in multi-family starts in Ontario, Saskatchewan and Manitoba. We expect these provinces to register declines in the near term.” Residential construction activity was paused in Quebec in late March, though resumed on April 20. The CMHC says it will resume counting Quebec in May. 

The CMHC uses the trend measure as a complement to its monthly SAAR of housing starts to account for “considerable swings in monthly estimates and obtain a more complete picture of Canada’s housing market,” the agency said. It noted that in some situations, only using SAAR can be “misleading,” as the data is largely driven by the “multi-unit segment of the market,” which can vary “significantly from one month to the next.” The standalone monthly SAAR of housing starts for all areas in Canada excluding Quebec saw an increase of 10.8% in April compared March. Meanwhile, the SAAR of urban starts increased by 12.4% in April, and multiple urban starts increased by 35.7%, while single-detached urban starts decreased by 27.1%. Rural starts were estimated at a seasonally adjusted annual rate of 7,285 units excluding Quebec.

Source: iPolitics



Building Permits Building permits, March 2020 

The total value of building permits issued by Canadian municipalities decreased 13.2% to $7.4 billion in March, with declines reported in seven provinces and two territories. The $1.1 billion national decrease was the largest since August 2014. This reflected notable drops in Ontario (-12.9%), Quebec (-18.1%) and British Columbia (-19.4%), which coincided with efforts to slow the spread of COVID-19.

Value of residential permits down
The total value of residential permits decreased 13.1% to $4.6 billion in March. The value of permits issued for single-family dwellings fell 15.3% to $2.2 billion, with the largest percentage declines observed in Prince Edward Island (-31.8%) and Quebec (-27.0%). The province of Quebec shut down construction, on March 24. Conversely, the only gains posted nationally in March were in New Brunswick (+2.3%) and the Northwest Territories (+3.0%). The value of permits issued for multi-family dwellings was down 11.1% to $2.5 billion, with the largest declines seen in Ontario (-13.0% to$1.1 billion) and British Columbia (-24.4% to $389 million).

Non-residential permits decrease for third consecutive month
Seven provinces reported declines in the value of commercial permits issued, bringing the national total down 19.7% to $1.6 billion. The largest decline in commercial permits was in Quebec (-36.6%), which recorded its third consecutive monthly decrease. 

The value of institutional permits (-15.7% to $602.2 million) was down in eight provinces, with Quebec (-37.0%) posting the largest decline. 

Industrial permits (+14.9% to $583 million) were the only component to show an increase at the national level in March. This was driven by strong gains in Manitoba (+185.9%), reflecting several large permits issued in the Winnipeg metropolitan area. 

First quarter 2020: Largest recorded quarter-over-quarter decrease in Quebec
In the first quarter of 2020, the value of building permits declined 1.0% compared with the fourth quarter of 2019. This was the third consecutive quarter-to-quarter decline, yet the value of permits remained 2.1% higher than in the same period a year earlier.

First quarter losses were reported in six provinces, with the most notable decrease in Quebec (-$1.1 billion). However, quarterly increases in British Columbia (+$472 million) and Ontario (+$463 million) offset much of the decline in Quebec. Residential permits issued in the first quarter were valued at $15.8 billion, representing a 5.8% increase (+$867 million) compared with the previous quarter, mainly driven by permits issued for multi-family dwellings.

The value of non-residential permits was down 10.7% to $9.4 billion. Declines in institutional (-$703 million), commercial (-$216 million) and industrial (-$206 million) permits all pushed down the national total. 

Source: Stats Canada


Housing Prices Could Fall 14% in Canada’s Biggest City by 2022 — and That’s the ‘Moderate’ Scenario 

DBRS Morningstar is looking at pandemic scenarios that include a housing price correction of between 10% and 15% per cent by 2022. The credit ratings agency’s scenarios anticipate some people with mortgages falling behind on payments, particularly in oil-producing provinces where the economic shock including fallout from efforts to contain the spread of COVID-19 would be greater. However, house price declines are expected to be sharper in cities — such as Toronto — where there has been a “significant run-up in prices in recent years.”Even in a “moderate” scenario envisioned by DBRS, home prices in Canada’s largest city would fall by 14%.

The ratings agency said it was not forecasting, but rather establishing benchmarks of moderate and “adverse” scenarios on which to base its debt-rating analysis.The scenarios are to be reviewed and updated by the end of May, according to Michael Heydt, a senior vice president at DBRS Morningstar. “It is certainly possible that the outcomes end up being better than the moderate scenario or worse than the adverse,”  Heydt said in an email.

All 10 Canadian provinces would experience sharp recessions in 2020 even in the moderate scenario. Alberta, Saskatchewan, and Newfoundland and Labrador are projected to suffer the largest declines in GDP due to the added impact of low oil prices.

In crafting the scenarios, DBRS analysts looked at home sales in March, which fell 14% from the previous month as more than three million Canadians either lost their jobs or worked fewer hours. Their report notes that April’s figures will be “substantially worse” since the March employment report was based on the week before most large provinces closed all non-essential businesses. 

The ratings agency also considered mortgage arrears when building its scenarios, noting that debt-to-disposable income in Canada is already “elevated by international standards” at 176%. “Notwithstanding income support programs from the federal government and mortgage deferral options from the banks, the rise in unemployment will inevitably lead more households to fall behind, and potentially default, on their mortgage payments,” the report said.

In the moderate scenario envisioned by DBRS, there is an assumption that strict social-distancing measures are gradually relaxed following “some success” in the second quarter containing the spread of COVID-19. This would lead to that start of relatively robust economic recovery in the third quarter. While there would be some permanent output loss, growth would be “above trend” next year, and the national unemployment rate would decline to between 7.5% and 8% by the end of 2021.

By contrast, in the adverse scenario, there would be a longer disruption of life and the economy and output losses would be more substantial. “Compared to the moderate scenario, the recession is deeper and the recovery is weaker,” the report said. “While some sectors might be able to recover the lost output as demand returns, other parts of the economy experience more long-lasting damage.” If the adverse scenario were to take hold, the national unemployment rate would not fall into the single digits until the second half of 2021, DBRS said.

RBC Hopeful for Home Sale Rebound
April could prove to the low point for Canada’s stagnating home sales, says an RBC senior economist. Local real estate boards reported declines of 40% to 70% for the month as social distancing made transactions difficult. But with provinces beginning to ease restrictions, RBC believes house hunting may return soon to something closer to normal, though the recovery will be gradual. “April could prove to be the cyclical low point for home resales,” said RBC senior economist Robert Hogue in a note.

Hogue believes the risk of a steep price decline is low in the near term, except in some markets where property values were already declining before the COVID-19 crisis hit. The “extraordinary” policy response from all levels of government and the Bank of Canada and help from commercial banks has helped ease the risk.“That said, the odds rise the deeper and longer the recession gets,” he said.

Source: Financial Post
Source: Financial Post