Supply Still Impacting Home Sales

Home sales recorded over Canadian MLS Systems climbed 6.6 per cent between January and February 2021 to set another new all-time record. Seasonally adjusted activity was running at an annualized pace of 783,636 units in February, says the Canadian Real Estate Association (CREA). Its revised forecast for 2021 is in the neighbourhood of 700,000 home sales. Strong demand notwithstanding, sales may be hard-pressed to maintain current activity levels in the traditionally busier spring months absent a surge of much-needed new supply; although, that could materialize as current COVID restrictions are increasingly eased and the weather starts to improve. Actual (not seasonally adjusted) sales activity posted a 39.2 per cent year-over-year gain in February. In line with heightened activity since last summer, it was a new record for the month of February by a considerable margin (over 13,000 transactions). For the eighth straight month, sales activity was up in the vast majority of Canadian housing markets compared to the same month the previous year. Among the eight markets that posted year-over-year sales declines in February, extremely limited supply at the moment is the most likely explanation. "At this point everyone knows how far the current monthly sales numbers are from historical norms, and that they have been setting record after record for eight months now, so this should not be a surprise like the weak numbers posted last spring were," says Costa Poulopoulos, chair of CREA. "The two big challenges that continue facing Canadian housing markets are the same ones we've been facing for months – COVID-19 and a lack of supply.” The number of newly listed homes rebounded by 15.7 per cent in February, recovering all the ground lost to the drop recorded in January. With sales-to-new listings ratios historically elevated at the moment, indicating almost everything that becomes available is selling, it was not surprising that many of the markets where new supply bounced back in February were the same markets where sales increased that month. There were only 1.8 months of inventory on a national basis at the end of February 2021 – the lowest reading on record for this measure. The long-term average for this measure is a little over five months. At the local market level, some 40 Ontario markets were under one month of inventory at the end of February.