As the pandemic rages on, and government mandated shut-downs ramp up, Canadians have a bit more spare time this holiday season. Bored and stuck at home, Canadians are doing what they do best, buy real estate.
In what is normally considered the slowest time of the year for residential real estate, buyers have been incredibly active this year. It is expected that 2020 will mark a new record high for annual home sales across Canada, once December figures come out. And while we don’t have the national data for December just yet, real-time data out of Vancouver provides some early indications for the rest of the country. As of December 27th, there have been over 2700 sales across Greater Vancouver, putting us on pace to surpass the previous record of just over 2800 home sales set in December 2015. (Prices were rising near 20% annually back in December 2015).
New listings are also coming on at an unusual pace for this time of year, and will set record highs here in December. Although, as has been the trend throughout 2020, sales continue to outpace new listings, squeezing inventory levels lower and pushing prices higher. The home price index for Greater Vancouver should inflate near 7% year-over-year at the end of the month, and continue accelerating from there, until inventory replenishes to healthy levels.
To say it’s been an incredibly surprising year for the housing market is understatement. It has certainly defied my expectations. It has humiliated every forecast out there, including the one released by our own government agency, CMHC, which has more intel on our mortgage market than anyone else.
In case you need reminding, back on May 27, 2020 CMHC released a forecast, suggesting, “Canada will experience a historic recession in 2020 with significant declines in all housing indicators. Sales are likely to register a decline in the range of 19% to 29% from their pre-COVID level before beginning a slow, gradual recovery in 2021. Our forecasts indicate that sales are not likely to recover to pre-COVID-19 levels by the end of the forecast horizon. Our forecasts indicate that the average MLS price will decline by 9% to 18% from its pre-COVID-19 level. Prices will begin to recover in the first half of 2021.”
Although to be fair, at the time of the report that seemed like a rational forecast, one that I agreed with, given the dire outlook of the economy.
However, as Winston Churchill once famously said, “When the facts change, I change my mind, What do you do?”
Since then, the Bank of Canada has more than tripled their balance sheet, and now owns 35% of the government bond market. The Federal Government is expected to run a $400B deficit. As a result, the household debt bubble that was supposed to implode, has miraculously been defused. In fact, personal checking accounts have grown by $103 billion, or 34%, the most in more than three decades.
In other words, the Canadian housing market is primed for another strong year ahead.
And when my information changes, I shall alter my conclusions.