Today the Canadian Real Estate Association (CREA) reported that new home sales fell 1.6% in November, a sign of some stabilization in a real estate market that remains hot. Home sales are 32.1% above year ago levels.
Despite a significant decline in spring transaction volumes, the strength in recent months has resulted in 511,449 homes sold in the first 11 months of the year, up 10.5% over last year making residential real estate one of the sectors of the Canadian economy that will post growth this year.
The number of newly listed homes fell by the same amount as sales (1.6%) leaving the sales-to-new listings ratio stable at 74.8% compared to its long-term average of 54.2%. CREA estimates that only about 30% of local markets are in balanced territory (conditions that favour neither the seller nor buyer) while the other 70% are well above historical norms, leaving them firmly in a seller’s market.
The number of months of inventory remains low at 2.4, with 21 markets in Ontario having less than one month’s supply of inventory.
With supply so tight, home prices continue to grow. The MLS Home Price Index rose 1.2% on the month and 11.6% compared to last November. The actual (i.e. non-seasonally adjusted) average home price increased to just over $603,000, up 13.8% from last year.
New housing starts data was also released this morning, corroborating the evident strength in the resale market. Housing starts increased by 14.4% in November to reach 246,000 units in November as the often-volatile multiple segment grew by over 20%.
Meanwhile, sales in the manufacturing sector increased by 0.3% in October but were flat in inflation adjusted terms, suggesting we will get no contribution from the manufacturing sector when we see the monthly GDP numbers next week. Activity in the manufacturing industry is showing a pattern that is evident throughout the economy, some segments are doing well while others are struggling. Manufactured pulp and paper goods are well above February levels while aerospace manufactures are reporting declining unfilled orders, reduced capacity utilization and sales far below February levels.
The data this morning reinforces our most recent economic outlook which shows the real estate market remaining hot but cooling from an unsustainably high level of activity in the third quarter, while the uneven recovery continues to play out in other segments of the economy. Further, evidence continues to build that we are in for a few months of weak growth as the virus continues to impact demand.
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