Housing activity bounced back close to pre- 15 July 2020 pandemic levels

Bottom line: Activity in the housing market rebounded much quicker than GLOBAL AND LOCAL we expected, with the level of transactions back to close to its pre-pandemic MARKET RESEARCH levels. This has been supported by pent-up demand, after two months of dismal activity, and historically low interest rates. At the same time, income CHARLES ST-ARNAUD support by the government and payment deferrals have avoided an increase Chief Economist in the number of households forced to sell their houses, despite the Charles.starnaud@alberta historically high unemployment rate. In Alberta, the increased uncertainty central.com coming from the drop in oil and the already poor housing market conditions before the pandemic likely explains the softer conditions.

The elevated unemployment rate and the expiry of the mortgage payment deferral program and emergency income support are to put pressure on housing sales later this year. Whether house prices decline sharply in some markets will depend on whether new listings increase faster than sales. However, we are concerned that, given the negative income shock and the high level of household debt, we could see some forced selling in some regions, especially BC, Ontario and Alberta, which could lead to sharper declines in house prices later this year.

Activity in the Canadian housing market rebounded 63.0% m-o-m in June, bringing the level of transactions close to their pre-COVID- 19 levels. The increase in activity was broad-based, but was particularly important in Québec (+73% m-o-m), BC (+71%% m-o-m) and Ontario (+67% m-o-m). In Alberta, the number of transactions increased by 52% m-o-m. Compared to the same month last year, the number of sales is 3.4% higher nationally, with significantly higher activity in Saskatchewan (+44%), Québec (+18%) and New Brunswick (+13%). On the flip side, the level of activity was significantly lower compared to last year in PEI (-14%) and Newfoundland (-13%), while it was about the same as in June last year in Alberta.

New listings surged by 49.5% m-o-m in June, but remain below their level of last year (-5.5% y-o-y). On a y-o-y basis, the decrease in new listings was mainly in Nova Scotia (-17% y-o-y), PEI (-16% y-o-y) and New Brunswick (-16% y-o-y). New listings declined modestly in Alberta (- 2% y-o-y). With the rebound in listing activity weaker than in sales, the sales-to-new listings ratio bounced higher in Canada, going deeper into a sellers’ market. The ratio increased mainly in Saskatchewan, Québec, and New Brunswick while it decreased only in Ontario. Nevertheless, market conditions indicate that New Brunswick, Québec, Ontario and Nova Scotia are sellers’ markets, while Newfoundland, Alberta and BC are buyers’ market.

With new listings lagging the rebound in sales, we are seeing some upside pressures on house prices with the MLS House Price Index increasing by 0.5% in June. Compared to last year, house price gains nationally were unchanged at 5.6%. Regionally, the biggest increases were in Hamilton-Burlington (+2.3% m-o-m), Niagara (+1.8% m-o-m), Moncton (+1.5% m-o-m) and Montreal (+1.4% m-o-m). The only cities to see a decline in home prices were Calgary (-0.4% m-o-m) and Toronto (-0.2% m- o-m). Compared to the same month last year, only the Prairies are seeing lower house prices, with declines in Calgary (-2.5% y-o-y), Edmonton (-2.1% y-o-y), Regina (-1.5% y-o-y) and Saskatoon (-0.2% y-o-y). The strongest gains are in Ottawa (+16% y-o-y), Barrie (+12% y-o-y), Montreal (+12% y- o-y) and Niagara (+11% y-o-y). Compared to the pre-pandemic level (February 2020), prices are lower only in Calgary (-1.8%), the Okanagan (- 1.1%) and Edmonton (-0.8%).

In Alberta, the housing market also rebounded (see table below for details) but sales activity remained significantly below last year’s level in many regions, led by Alberta West, Lethbridge and Grande Prairie. The level of transaction is higher in South Central Alberta, Fort McMurray, Edmonton and Medicine Hat. It is important to note that the floods in the Fort McMurray area in April are likely still impacting the local housing market. New listings also declined compared to the same month the previous year in many regions. However, the impact on the sales-to-new listings ratio has been mixed. It improved in South Central Alberta, Lethbridge, Fort McMurray and Medicine Hat, while it deteriorated in Grande Prairie, Lloydminster, Calgary and Edmonton. The main seller’s markets are South Central Alberta and Lethbridge, while the main buyer’s markets are Grande Prairie, Edmonton, Medicine Hat and Calgary. Average house prices declined compared to the same month last year in many regions, led by Fort McMurray, Lloydminster and Alberta West. There were some increases in Grande Prairie, Lethbridge and South Central Alberta.

Fig 1. Number of transactions - Canada Fig 2. Number of transactions - Alberta

50,000 6,500 45,000

40,000 5,500 35,000 4,500 30,000

25,000 3,500 20,000 2,500 15,000

10,000 1,500 2008 2010 2012 2014 2016 2018 2020 2008 2010 2012 2014 2016 2018 2020 Source: CREA Source: CREA

Fig 3. House Prices – Canada (% y-o-y) Fig 4. House Prices – Alberta (% y-o-y)

20 70 60 15 50 Calgary 10 40 Edmonton 30 5 20

0 10

0 -5 -10

-10 -20 2001 2004 2007 2010 2013 2016 2019 2001 2004 2007 2010 2013 2016 2019 Source: CREA Source: CREA

Fig 5. Residential Sales – by provinces Fig 6. House prices by metropolitan areas (% y-o-y change) (% y-o-y change)

Nfld Greater Moncton Greater Montreal PEI Niagara Hamilton-Burlington NS Oakville-Milton NB Barrie Guelph QC Greater Toronto ON Ottawa Saskatoon MB Regina Edmonton SK Calgary AB BC: Victoria BC: Vancouver Island BC BC Okanagan BC: Lower mainland Canada Canada -20.0 0.0 20.0 40.0 -5.0 0.0 5.0 10.0 15.0 20.0 Source: CREA Source: CREA

Fig 7. Regional details

Number of sales Jun 2019 Jun 2020 y-o-y % ch. 3-month MA Since Feb 2020 Calgary 1763 1788 1.4 -32.1 -6.5 Central Alberta 301 283 -6.0 -30.1 2.9 Edmonton 1630 1728 6.0 -27.9 5.5 Fort McMurray 88 105 19.3 -29.0 2.9 Grande Prairie 217 174 -19.8 -46.5 -20.2 Lethbridge 214 131 -38.8 -41.8 -48.6 Lloydminster 46 47 2.2 -14.7 20.5 Medicine Hat 95 101 6.3 -21.5 14.8 South Central Alberta 27 35 29.6 -2.8 25.0 Alberta West 99 52 -47.5 -50.6 -36.6 Alberta - Total 4480 4444 -0.8 -31.4 -4.2 New listings Jun 2019 Jun 2020 y-o-y % ch. 3-month MA Since Feb 2020 Calgary 3227 3424 6.1 -31.9 -2.0 Central Alberta 759 555 -26.9 -39.7 -26.3 Edmonton 3146 3391 7.8 -26.7 5.7 Fort McMurray 171 142 -17.0 -39.7 -35.7 Grande Prairie 388 367 -5.4 -26.5 -11.6 Lethbridge 401 180 -55.1 -55.0 -52.1 Lloydminster 131 149 13.7 -17.7 25.2 Medicine Hat 181 171 -5.5 -27.6 6.2 South Central Alberta 68 59 -13.2 -46.6 -20.3 Alberta West 241 111 -53.9 -49.8 -54.5 Alberta - Total 8713 8549 -1.9 -32.0 -5.7

Sales-to-new listing Jun 2019 Jun 2020 y-o-y change 3-month MA Since Feb 2020 Calgary 54.6 52.2 -4.4 1.5 -2.6 Central Alberta 39.7 51.0 28.6 6.7 14.5 Edmonton 51.8 51.0 -1.6 0.3 -0.1 Fort McMurray 51.5 73.9 43.7 3.2 27.8 Grande Prairie 55.9 47.4 -15.2 -15.9 -5.1 Lethbridge 53.4 72.8 36.4 15.9 5.0 Lloydminster 35.1 31.5 -10.2 3.9 -1.2 Medicine Hat 52.5 59.1 12.5 4.1 4.4 South Central Alberta 39.7 59.3 49.4 42.1 21.5 Alberta West 41.1 46.9 14.0 2.1 13.2 Alberta - Total 51.4 52.0 1.1 1.2 0.8 Average Price Jun 2019 Jun 2020 y-o-y % ch. 3-month MA Since Feb 2020 Calgary 437,723 435,155 -0.6 -4.7 -0.6 Central Alberta 303,962 317,675 4.5 -3.6 6.3 Edmonton 358,337 356,828 -0.4 -2.7 0.7 Fort McMurray 377,275 301,377 -20.1 -14.2 -25.3 Grande Prairie 307,707 321,247 4.4 4.7 13.7 Lethbridge 265,917 303,652 14.2 7.1 8.8 Lloydminster 298,674 266,499 -10.8 -7.1 11.8 Medicine Hat 310,591 304,057 -2.1 1.0 11.2 South Central Alberta 182,711 220,541 20.7 1.6 34.5 Alberta West 360,085 337,892 -6.2 -14.5 -1.7 Alberta - Total 375,544 371,800 -1.0 -3.7 -1.0 Note: the 3-month moving average is the moving average of the year-on-year change. Source: CREA

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