Average Canadian home prices have surged $100,000 since August — the sharpest surge on record.

A new report by the Royal Bank of Canada notes that average home prices in Vancouver jumped a record $143,000 in six months, while Toronto homes have risen $139,000.

“Yet it was markets in the periphery that led the way. Single-family home prices soared $145,000 in the Fraser Valley since August. Hamilton-Burlington (up $137,000), Kitchener-Waterloo (up $114,000) and London-St. Thomas (up $104,000) weren’t far behind” RBC economist Robert Hogue wrote in a note Monday.

“Single-detached homes also got a lot more expensive in other B.C. markets, virtually all of southern Ontario, and parts of Quebec and the Atlantic Provinces.”

Latest data from the Canadian Real Estate Association for February shows national home sales jumped 6.6 per cent, compared to January. CREA’s home price index rose 3.3 per cent month-on-month in February — a record-setting rise.

CREA’s non-seasonally adjusted home price was up 17.3 per cent on a year-on-year basis in February — its biggest gain since April 2017 and close to the highest on record.

The rapid surge in home prices have brought in even more speculators and also triggering the so-called Fear Of Missing Out (FOMO) instinct among buyers who were eager to enter the fray before prices run away further from them.

“A recent uptick in longer-term interest rates might also be dialing up the eagerness to act with some seeing the increase as a turning point for interest rates,” Hogue said. “In short, self-reinforcing price dynamics have taken hold in many parts of Canada, and are poised to keep things boiling in the near term.”

But there is little chance of speculators getting their comeuppance any time soon, with markets crashing and those sitting on the sidelines swooping in to pick up bargains.

Hogue expects a soft landing for home prices, as long-term interest rates eventually rise, and prices modestly decline by late 2022.

The supply side is also fuelling the market, with inventory levels at 1.8 months of sales, the lowest ever for February. Canadian home starts also stood at 246,000 in February, compared to 284,000 in January. While home starts remain at historically high levels, they are clearly not enough to calm markets.

Ksenia Bushmeneva, an economist at TD Bank Group, says that historically tight supply of houses on the market will continue to push prices higher in the near-term.

“However, home price growth is expected to moderate in the second half of this year, as prospective sellers become more comfortable listing amid accelerating vaccination pace and buyers shift their attention to more affordable options,” the economist noted in a report published Monday.

Daren King, economist at National Bank of Canada, expects some government regulations coming in to cool the sizzling market.

“With such a strong and widespread level of activity in the real estate market, we do not rule out the possibility that the government will consider macro-prudential measures in the coming months to cool the market,” King said.

Source: Financial Post

METRO VANCOUVER MARKET HIGHLIGHTS
FEBRUARY 2021

Competition amongst home buyers is putting upward pressure on home prices across Metro Vancouver’s* housing market.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 3,727 in February 2021, a 73.3 per cent increase from the 2,150 sales recorded in February 2020, and a 56 per cent increase from the 2,389 homes sold in January 2021.

Last month’s sales were 42.8 per cent above the 10-year February sales average.

“Metro Vancouver’s housing market is experiencing seller’s market conditions. The supply of listings for sale isn’t keeping up with the demand we’re seeing,” Colette Gerber, REBGV Chair said. “Competition amongst home buyers is causing multiple offer situations and upward pressure on prices.

“This is particularly true in the townhome market where demand is outstripping the available supply. Conditions differ depending on location and property type so it’s important to work with your local REALTOR® to develop strategies to meet your needs.”

There were 5,048 detached, attached and apartment homes newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in February 2021. This represents a 26.1 per cent increase compared to the 4,002 homes listed in February 2020 and a 12.7 per cent increase compared to January 2021 when 4,480 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 8,358, a 9.1 per cent decrease compared to February 2020 (9,195) and a 0.6 per cent increase compared to January 2021 (8,306). This is 21.2 per cent below the February 10-year average for new listings.

For all property types, the sales-to-active listings ratio for February 2021 is 44.6 per cent. By property type, the ratio is 41.8 per cent for detached homes, 61.8 per cent for townhomes, and 41.7 per cent for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“Low interest rates remain a key driver in today’s market. We’re seeing steady numbers of first- time home buyers and move-up buyers entering the market,” Gerber said.