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National home sales shot up in June

National home sales shot up in June, with prices also climbing steadily, according to June data released today by the Canadian Real Estate Association (CREA).

Transactions were up about 15.2%, while the average property price was up 6.5% from June 2019 to $539,000. Excluding the country’s most expensive markets, Toronto and Vancouver, the average price falls to $432,000.

“While June’s housing numbers were mostly back at normal levels, we are obviously not back to normal at this point,” said Shaun Cathcart, CREA’s senior economist. “I guess the bigger picture is one of cautious optimism. The market has recovered much faster than many would have thought, but what happens later this year remains a big question mark. That said, daily tracking suggests that July, at least, will be even stronger.”

But it’s the month-over-month data that is truly staggering: property sales are not only 150% above where they were in April, but sales rose 83.8% in the Greater Toronto Area , 75.1% in Montreal and 60.3% in Greater Vancouver.

Source: CREA

“Pent-up demand (supported by the fact that would-be house hunters have likely suffered lesser job declines) fuelled a surge in home sales during June. The gain brought sales levels nearly back to where they were in February,” noted TD economist Rishi Sondhi. He added that average prices have almost entirely erased pandemic-related losses, with prices down only 0.5% compared to February.

And with such a frenzy of homebuying activity, it’s no wonder that national inventory levels are at a 16-year low with just 3.6 months of housing supply left, should sales continue at the current rate. With such limited housing stock, buyers are forced to compete fiercely for properties.

Another metric that shows sellers with the upper hand in most markets is the sales-to-new listing ratio, which is at 63.7%. A balanced ratio is between 40-60% and anything below 40% is considered a buyers’ market.

Homebuyers Growing More Confident

As the demand for homeownership is clearly still strong, with or without COVID, prices are likely to continue moving upward for the time being barring something drastic that would force homeowners to start listing their properties en masse. Some speculate the forthcoming end of the government’s income-assistance programs and mortgage payment deferrals that were offered by most lenders may be that “drastic” something.

“While third-quarter sales growth is likely to be very strong, what takes place in the few quarters thereafter is a major risk point, as mortgage deferral programs and the CERB are set to conclude in the fourth quarter,” Sondhi noted. “In our view, as long as unemployment is elevated, population growth slows, and CMHC measures remain in place, growth in home sales and prices is likely to be subdued after this initial burst.

On the other hand, homebuyers may be assured by the prospect of lower interest rates for potentially years to come, as was confirmed today by Bank of Canada Governor Tiff Macklem.

“The message to Canadians is that interest rates are very low and they’re going to be there for a long time,” Macklem said during a press conference following the Bank’s interest rate decision, in which it left the overnight lending rate at 0.25%. “We recognize that Canadians and Canadian businesses are facing an unusual amount of uncertainty, so we have been unusually clear about the future path for interest rates.”

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