Real estate prices in Canada rose at fastest pace on record as inventory squeeze eased
Real estate prices in Canada are seeing their rate of growth accelerate again. The Canadian Real Estate Association’s (CREA) Home Price Index (HPI) shows prices jumped in November. Although the inventory squeeze has eased somewhat, buyers have raised home prices at an even faster rate. The annual growth in house prices is at an all time high and accelerating.
Real estate prices in Canada hit record high
The price of a typical or benchmark home in Canada has never been higher. The record composite price was $ 780,400 in November, an increase of 2.35% ($ 17,900) from the previous month. Annual growth also reached a rate of 25.31% ($ 157,600). Again, this is a record for the prices. It’s hard to believe a typical house across Canada jumps $ 17,900 in a month, but it has happened. Again. Did we mention it’s all across Canada?
Home prices in Canada have never grown faster and it’s accelerating
Prices aren’t the only record set, but growth is also moving at the fastest rate in history. The monthly increase is the largest since April. Annual growth of 25.31% signifies a new record for the composite benchmark CREA. Price growth has not slowed down, it is in fact accelerating as moral hazard sets in.
Canadian real estate benchmark change
The 12-month price of a change in a typical home across Canada.
Source: ACI; Better accommodation.
Canada’s housing stock is under pressure as demand is boosted by monetary policy
If you’ve heard that home prices are going up due to a lack of inventory, you’ve heard right. Well, sort of. Seasonally adjusted sales of existing homes reached 54,222 units in November. This is an increase of 0.6% from the previous month. Home sales are just below the November record set a month earlier.
Sales and inventory of real estate in Canada
The seasonally adjusted number of existing home sales and new listings of homes for sale for the month of November.
Source: ACI; Better accommodation.
Canadian real estate inventories are increasing a little faster. Seasonally adjusted new listings reached 70,406 units in November, up 3.3% from the previous month. Slightly below the November record, but the highest level since 2017. Inventories are tight, but mostly the result of high home sales. This is quite typical, and even high, compared to the last few years. The low rates simply encouraged buying much faster than the ads could go up.
Canadian home price growth accelerated as inventory squeeze eased (slightly)
New ads that are growing faster than sales mean some relief from the squeeze. Just not a substantial relief, and people haven’t noticed it. The sales to new listings ratio (SNLR) fell to 77% in November, down 2.1 points from the previous month. When it is above 60%, the market is considered tight and prices are expected to increase. As inventory problems ease, buyers speed up what they’re willing to pay.
The problem of shortage of inventory is more like a problem of excess demand, suggests BMO. Inventory is relatively in line with historical levels, showing even a slight increase. However, home sales are heavily driven by cheap rates. A greater part of this demand is made up of investors, who now represent a larger segment than first-time buyers in many regions.
Every day the economy improves and monetary policy remains at deep recession levels, which means easy money. Inflation and home prices are rising at a faster rate, even as inventory problems abate. If you think low rates are here to stay, that makes sense. In this case, a buyer also tries to spend money that they think will be worth much less next year.