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Average House Prices Rise Back Above $700k as Inventory Falls
Home prices continued to rise in October as housing inventory fell back to its all-time low recorded earlier in the year.
The average selling price in October was $716,585, up 18.2% year-over-year and 4.4% from September’s reading of $686,650, according to the Canadian Real Estate Association’s latest monthly report.
Removing the high-priced markets of the Greater Toronto and Vancouver areas, the average price stands at $561,585, up 17% year-over-year.
There were 57,077 home sales in October, down 11.5% from a year earlier, but up 8.6% on a monthly basis, the largest month-over-month increase since July 2020, CREA noted.
Meanwhile, housing inventory continues to be a major factor keeping prices higher, as the months of inventory measure fell back to just 1.9, a record low first reached in February of this year. The long-term average is roughly five months. New listings were up by 3.2% from September, which represents gains in about 70% of markets, CREA said.
“…I don’t think too many observers would have guessed the monthly trend would be moving up again heading into 2022,” Shaun Cathcart, CREA’s senior economist, said in a release. “A month with more new listings is what allows for more sales because those listings are mostly all still getting gobbled up; however, with demand that strong, the supply of homes for sale at any given point in time continues to shrink. It is at its lowest point on record right now, which is why it’s not surprising prices are also re-accelerating.”
Cross-Country Roundup of Home Prices
Here’s a look at some more regional and local housing market results for October:
- Ontario: $912,763 (+22.9%)
- Quebec: $470,216 (+16.5%)
- B.C.: $963,231 (+18.7%)
- Alberta: $426,926 (+3.9%)
- Barrie & District: $786,500 (+35.7%)
- Halifax-Dartmouth: $485,642 (+24.7%)
- Victoria: $871,000 (+21.9%)
- Greater Montreal Area: $506,800 (+21%)
- Greater Toronto Area: $1,128,600 (+24.2%)
- Ottawa: $645,800 (+16.9%)
- Greater Vancouver Area: $1,199,400 (+14.7%)
- Winnipeg: $318,200 (+10.1%)
- St. John’s: $291,500 (+7.7%)
- Calgary: $445,600 (+9.5%)
- Edmonton: $341,700 (+5.5%)
Prices Expected to Keep Rising Until the BoC Hikes Interest Rates
While CREA chair Cliff Stevenson noted that one month of data does not make a trend, some observers suggest the rise in prices is likely to continue until the Bank of Canada starts raising interest rates.
And that goes for a wide cross-section of the real estate market, including urban areas, smaller markets around the perimeters of metro areas and the condo segment, which is up an annualized 20% over the past three months, notes Robert Kavcic, senior economist at BMO Economics.
“The Canadian housing market is well overdue for higher rates, and momentum is still pointing upward until it gets them,” he said.
Benoit Durocher, senior economist at Desjardins, agrees that high demand is likely to keep upward pressure on prices for the time being.
“The housing market is…showing surprising resilience. Although it is too soon to tell whether the downtrend is already over, recent results suggest the presence of pent-up demand,” he wrote. “Some households may also be moving up their purchases to avoid the interest rate increases expected in the coming months.”
The prospect of higher home prices and rising interest rates could start to impact the annual inflation rate as well, Durocher noted. “Until now, the inflationary effect of home price increases was partially offset by low interest rates. This could change with the expected increase in interest rates in the coming months.”
Economists with RBC agree that buyers could be moving up their purchases ahead of interest rate hikes, and don’t see the turnaround in prices in September and October as being sustained.
“We’re unconvinced the more vigorous activity and price gains marks a change in direction for the market. We suspect it reflects a temporary uptick in demand driven by buyers rushing to land deals before interest rates rise,” wrote RBC economist Robert Hogue. “Our view remains that deteriorating affordability (arising from soaring prices or higher interest rates, or both) and easing pandemic restrictions will gradually cool demand over the coming year.”
- Steve Huebl·Real Estate News·November 15, 2021