It was back to the offer table for Canadian house shoppers. After a brief pause in shopping activity, home buyers returned in September. Sales activity increased 0.9% from August, as new listings declined. Low inventory levels continue to decimate the nations housing market as buyers pick over the scraps. There is just 2.1 months of inventory on a national basis. Just for context, a balanced market requires 4 months of inventory. In other words, new listings have to surge or sales have to plummet just to hopefully get to a balanced market where price growth can moderate.
Unfortunately we are nearing the last of the fall market, with new listings expected to take their usual seasonal decline along with home sales. I don’t expect much to change between now and the birth of the spring market in early 2022. Therefor, it’s no surprise that home prices continue to rip, up 1.7% nationally over the past month. Assuming this pace continues (seems unlikely), home price inflation would be running at over 20% annualized, that’s on top of the 21.5% they already increased during the past twelve months.
Year-over-year price growth is as follows:
It should come as no surprise, but rampant housing inflation further complicates things for the Bank of Canada which is already desperately trying to temper consumer inflation expectations. CPI inflation data for September will be released this Wednesday, and it’s expected to drift higher, closer to 4.5%.
I don’t envy Tiff Macklem’s position. Inflation is proving to linger longer than anticipated, and raising interest rates on a mountain of debt is easier said than done. The Bank will be releasing a monetary policy update and interest rate decision on October 27th. God speed.