Canadian housing market heated up in October
- Canadian existing home sales jumped by 8.6% m/m in October, clocking in at a robust 53.7k units.
- Provincially, gains were relatively broad-based with sales up in 7 of ten provinces. Leading the way were Manitoba (+16.0% m/m) and Saskatchewan (10.2%). Sales were also higher in Ontario (9.7%), Alberta (9.4%), B.C. (8.6%), and Quebec (7.6%).
- New listings advanced at a decent 3.2% m/m clip. However, the stronger gain in sales resulted in tighter markets, with the sales-to-new-listings ratio climbing to 79.5% from 75.5%. Meanwhile, the months' supply of inventory fell to a near-record low of 1.9 months.
- Canadian average home prices surged 2.6% m/m in October, building on August's solid 1.3% monthly gain. Prices were higher in every province, paced by PEI (5.9%), and Manitoba (5.8%). In the larger provinces, prices were up by 3.0% m/m in B.C., 2.4% m/m in Quebec, 1.9% m/m in Ontario and 1.5% m/m in Alberta.
- The MLS home price index, a more "like for like" measure, leapt 2.7% higher m/m, the fastest rise since March. Prices for both single-family and condo units advanced by 2.7% m/m in October. Single-family home price growth is re-accelerating, rising 26.2% y/y - the steepest gain since July. Apartment prices continued to climb in year-on-year terms, rising by 14.9% - the fastest growth since March 2018.
Key Implications
- This was a strong report that reinforced the fact that the housing market still carries significant momentum. In addition, October's solid showing probably didn't receive much of a boost from buyers pulling forward purchases ahead of higher rates, as the Bank of Canada didn’t communicate its more hawkish tone until very end of the month.
- It will take further interest rate increases to meaningfully moderate demand, and they should be on the way. However, sales levels are likely to remain healthy through next year, supported by firm economic and income growth, a rising population and elevated household savings (some of which should flow into down payments). Also, a large chunk of the population has aged into what has historically been prime homebuying years.
- On the supply side, while new listings saw a nice gain in October, it has generally been flat for the past several years and has struggled to keep up with pandemic-era demand. This relative lack of supply may be preventing even stronger sales growth, while helping keep resale markets drum tight. In addition, even markets for newly built homes are tight. In this environment, prices should continue to climb next year even as rates push higher.
