The July Canadian housing numbers are in and it was yet another slowdown on the sales side, making four months in a row; albeit, from completely unbelievable (and certainly unsustainable) levels back in March. So, not a big surprise.
That said, it was also the smallest of those four straight monthly declines, so it looks like activity may be starting to stabilize. And where is it looking like it’s starting to stabilize? The answer is still well above historical norms—around 15% above the 10-year monthly average in July. Plus, it was still the second-best ever sales figure for that month. Basically, we’re somewhere in between pre-pandemic levels and peak-pandemic levels.
But here’s the bigger issue—we’re always focusing on the ups and downs of the sales numbers. What’s more relevant to the conversation right now is not that sales are more ‘normal’ than they were a few months ago, it’s that a historically high number of transactions are still coming out of an end-of-month inventory of properties for sale that is the lowest we’ve ever seen.
Record-low active listings
Seasonally adjusted active listings were a record-low 110,000 on the first day of August. Six years ago, we had 250,000 properties for sale and much lower demand. That’s the difference between home prices just tracking inflation and 25% year-over-year price growth. We’re very much not in Kansas anymore, and that Goldilocks (not too hot, not too cold) market has long disappeared into the rear-view mirror.
While year-over-year price growth is still very strong almost everywhere across Canada, we’ve been watching month-to-month price growth slow as the frenzy of earlier this year fades. That said, current demand-supply conditions do not suggest this flattening-out will continue. It probably won’t go back to what we saw at the beginning of this year, but there were already a few canaries in the coal mine pointing to a re-acceleration of prices back in June. In July there were quite a few more, mostly in Ontario.
The ‘missing’ middle
That’s because the problem of high housing demand amid low supply hasn’t gone anywhere. The COVID-19 pandemic at least shone a big spotlight on it. That got almost everyone to agree on what the problem is—supply. And now we have a federal election where some solutions will be proposed.
The issue is so simple. If you want to have record-level population growth at a time that the population is also becoming increasingly middle-aged, you need the housing stock to keep up because people need to live somewhere.
Actually getting those units built is the not-so-simple part, as evidenced by the fact that the medium-density housing (also known as gentle density housing) we all agreed a decade ago was the way forward is still referred to as the ‘missing’ middle.