There are always going to be those who discredit anything said about real estate by someone who works in real estate, and often saying they’re a ‘shill’ for their industry and profession. Is that more common coming from someone who’s never engaged in the financial prudence and hard work required to buy a home? Not always, but it still is fairly common unfortunately. There’s a lot of people who are earnestly wishing the ‘very’ hot nature of the real estate market in Canada wasn’t that way at all.

We’ll leave that there, but what we are going to talk about today is how an indisputable statistic recently released from the Bank of Montreal’s economists is proving very clearly that the market is indeed super hot in Canada and that being a homeowner in this country is definitely the way to be. We know that realtors will relate to this, and not only because the majority of them will be homeowners themselves. It is something of a double-edged sword though, and that goes without saying. Real estate can be a well-paying career choice, but a strong market means more and more realtors trying to get that same slice of the pie.

Which is precisely why our online real estate lead generation system here at Real Estate leads is as hyped as it is. It’s great for any realtor who’s willing to invest in an easier way to generate new real estate clients, but it’s especially good for those who are new to the real estate business and need those new clients as part of building a name for themselves in the business. Check out these testimonials from realtors just like you.

But back to our topic for this week, and that sizzling 91.6% number and all the significance behind it.

New Listings Being Absorbed Quickly

New listings fell 13.3 percent in January across Canada, and this brought up the national sales-to-new listings ratio to a number – over 91% – that would have seemed absurd to ever think possible if you would have taken a consensus at this time last year. From one coast to the other, what we’re seeing is that nearly all new listings are getting absorbed within a month and based on projections around that number it can be forecast that the standing inventory of homes available for sale at any time would all be all gone in less than 2 months.

And probably much less. We know that this metric usually is in the vicinity of 60% for the whole country, and so by adding half that number on top of it there’s a situation now where home prices are almost guaranteed to rise further. Prices are indeed currently on the rise nationwide, and are accelerating at quite a rate. The effect is somewhat twofold with this, meaning there becomes a smaller pool of qualified buyers for homes in certain areas. And particularly for detached homes.

But what realtors should be doing with their qualified buyers is telling them to be aggressive with making offers on homes that appeal to them, as what might be an acceptable offer to the current owners at this time might not be in, say, a month’s time given what their realtor might advise them about what their home is worth at that time.

January’s National Home Price Index Rise

Last month the national home price index rose 13.5% year over year, and that amounted to the fastest it has done so since Mid-2017. That date is noteworthy for the following reason – that’s when policymakers were working overtime trying to calm markets in Canada’s two perennially hottest ones – Toronto and Vancouver.

So where we are with all of this is unless there’s a sudden surge of homes listed for sale (which isn’t going to happen in Canada – anywhere – given the fact there’s not enough inventory as it is. People need roofs over their heads) we are going to see prices going higher still.

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Real estate and housing development on a National scale are difficult to predict at the best of times, and what we saw last summer and fall once COVID was firmly in place was a very solid example of that. The market didn’t crash like so many people predicted it would, and in fact it’s remained fairly resilient right up and into 2021 as we are here now. We think it’s safe to say that the demand end of the classic equation will always be there, but one that might warranty some concern is related to the supply end of it.

An ample amount of new housing starts are needed to keep this equation where it needs to be for a healthy real estate market, and the needs is magnified in any area of the country seen as desirable by the same prospective homebuyers that real estate agents will be wanting to work with. Those that are newer to the business may find these are trying times, and that’s why our online real estate lead generator here at Real Estate Leads is such an excellent resource for anyone who needs to more out of their client prospecting efforts at a critical time in their young career.

But back to topic, and it does appear that there may be considerably less in the way of new housing starts in Canada throughout the remainder of this year. Let’s have a look at why that might be.

Turbulent Time

While overall it’s true that housing markets in Canada’s major markets look healthy, this year’s turbulence will likely mean fewer housing starts in 2021, according to industry experts. The 3^rd quarter of last year (2020) had 237,300 housing starts in all of Canada, according to Canada Mortgage and Housing Corporation statistics.

That worked out to a 22.2% increase from the 2^nd quarter that came right before it. Home sales also jumped up 93% during the same period, and prompting a rise in home prices of around 4%. That does indicate a robust economic recovery from the COVID-19 pandemic-induced lockdowns during the spring, but we need to start tempering the enthusiasm starting right there. It seems a deceleration is on the horizon.

The reason this is being forecasted is really quite basic; our sharp economic recovery coincided with the easing of restrictions in the second quarter. Since then, thought, it has stalled and is now expected to be stalling out for the rest of this year. The 2nd wave of COVID-19 that began in the fall along with the unavailability of effective vaccines are principal factors in this hampered growth.

Robust housing demand continued to factor into positives for new home sales and starts through to the end of September. Paired with low inventory and supply bottlenecks meant house prices continued to appreciate. Housing starts will still likely surpass the total for 2019, but new home sales will decrease, and especially in the new condo segment. It’s also likely that despite interest rates being very low and predicted to stay that way, rising home prices will still equal housing affordability troubles and take away from the demand factor to a certain extent.

Region / City Specifics

In Ontario, the 10-year average is about 70,000 housing starts, and last year there were just under that number of starts, primarily on the back of a fairly strong economic performance. This year the expectation is that the pace of projects will be a little bit slower.  More specifically for Ontario and the GTA in particular, reduced immigration will likely cut back on housing demand in Toronto’s condo sector throughout this year, but single-family housing demand will remain strong.

In Montreal housing starts have been resilient this year. Residential construction picked up nicely, in comparison to housing starts that only rose by 1% in the first nine months of 2020. However, new condo sales in the city declined last year and this year, which could result in fewer housing starts after existing projects wind down.

New condo sales in Vancouver were a disappointment for 2020, and that’s not surprisingly worked out to fewer housing starts this year – down 33% to this point. But based on low inventory and healthy demand, housing starts likely will not decline too much through 2021.

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One of the nicknames Toronto has is the ‘Big Smoke’. If the numbers for real estate in January are any indication then it would appear apt, as it seems the fire of demand for real estate that closed out last year is burning even stronger to start 2021. Vancouver and Toronto have long been the hottest markets in Canada for obvious reasons, but one of the things that Toronto has had going for it that Vancouver hasn’t is the ability to grow outwards.

However, now it’s become a situation where even that isn’t the mediating factor it used to be. So what’s being seen is that Toronto is having the same acute supply-demand disparity that Vancouver has had pretty much forever. All of this of course added to by constant inflows of people, although not as many last year as year’s previous for obvious reasons.

The surge in the real estate market in Toronto is of course good for realtors, as well as anyone else who’s livelihood is related to the market or any of the many other industries connected to it. If you’re a realtor working there, however, all that benefit is somewhat offset by the fact that the number of people competing for that same slice of the pie makes your profession even more competitive. That’s why our online real estate lead generation system here at Real Estate Leads is such a smart choice for realtors who want every advantage they can get.

But back to topic, it’s a great time to be a homeowner with your property on the market in Toronto.

Condos Leading the Way

The condo market lead the way as Toronto home sales jumped 52.4% year-over-year in January, with 6,928 homes coming to have new owners according to the Toronto Residential Real Estate Board. The average selling price for all homes sold in the region in January also went up 15.5% to $967,885. 

All of this went along with activity in the condo market nearly doubling from this exact time last year, going up 85.5%. Countering that enthusiasm somewhat, however, might be the fact that average selling prices fell 4.7% for January. Sales growth in that category IS outstripping listings growth, however, and that usually suggest an incoming price rebound.

Another factor that’s not mentioned there but could be contributing to lower selling prices is owners who see this as the perfect time to move out of the city being willing to accept slightly lower bids on their homes. Unlikely to happen in most cases, but there could be some of that at play here.

Detached Home Prices Surge Ahead on their Own

Looking now at detached homes, there was no slowing down with sales and prices here. Sales volumes rose nearly 35% and average prices were up around 31% year-over-year in January. The detached segment has proven extremely resilient during the pandemic. The reason for that is the same as in any other major metro area. There is no shortage of city-dwellers who are in search of space and more backyard space to accommodate their families in a time when staying home is what’s on the slate most of the time

One thing that should be mentioned here is that even though the rise in demand and impact of rock-bottom interest rates has definitely helped fuel the boom in prices, these rapid rises have some in the industry concerned that about the growth being unsustainable.

More specifically, the concern is that policymakers have been overstimulating the market as a means of keeping the general economy buoyed during these challenging economic times. That’s perfectly understandable, but nearly any economist will tell you there has to be a balance no matter the scenario. Overly high growth rates that have risen dramatically over short periods of time rarely ever work out as well as certain people would hope they would.

Double-Digit Growth for Immediate Future

The resiliency of the real estate markets in Canada’ big cities continues as strong as ever, and the TRREB is expecting to see double-digit price growth continue for the immediate future. Plus, economic resurgence post-vaccine and supportive demographic trends are probably going to push prices even higher. In line with that belief the board is expecting average home prices to get up and past the $1-million mark for the first time ever sometime this year.

Is that full of promise if you’re a realtor working in Toronto? You’re darn right it is, but keep in mind it’s going to be appealing for exactly the same reason for many people who are just like you.

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It’s a proven-effective way to get more out of your client prospecting efforts, and that has to sound plenty good if you’re an ambitious realtor.

Much has been made of the way how the decline in the oil industry has combined with the economic downturn of COVID to make Alberta doubly hardly hit with a battered economy compared to the rest of Canada. In fact there was an article today that stated how commercial office space in Cowtown may reach up to 30% vacancy rates before long. This of course isn’t good news, as the oil and gas industry has been a major contributor to Canada’s federal coffers for many, many decades now.

Despite all of this, however, there is actually still a net inflow of new residents to the city, and that in part may be because new home prices in Calgary are significantly lower than other major metro areas in the country and there continues to be good work opportunities for people who are new to Canada too. So there’s something of an opposing forces situation here, and it’s creating for what experts call a sideways real estate market.

One that’s not going up, or going down. Instead, it’s going sideways and you’re free to imagine that to the left or right. Whichever’s to your fancy. But what needs to be known here is that if you’re a realtor in Calgary or the surrounding communities one of the best things you can offer to prospective new clients is real genuine knowledge about the changing market and where they might be best investing in it. But of course you need to make those people into your clients before impressing this way, and that’s why our online real estate lead generation system for Canadian realtors is as highly recommended as it is.

But let’s get back to topic, and spell out a little more of what might be on the horizon for residential real estate in Calgary this year.

More Resilient Than You Might Think

Calgary’s housing market followed the rest of the country’s lead during the second half of 2020 in defying the detrimental economic effects of the COVID-19 pandemic, and it turns out that it looks like it’s going to stay fairly resilient for this year.

Local economists and real estate experts are saying thatsome of the momentum recorded at the end of 2020 will continue into 2021, and much of that will be fueled by exceptionally low lending rates and something we’ve talked about at length and is a very real thing – pent up demand.

Sales are expected to rise some 5% on an annual basis in 2021, and the inflow of new residents to Calgary that we talked about early would make this number even higher if these persistent economic challenges growing out of COVID weren’t the factor that they are.

So while it’s true that Calgary is currently saddled with record-high unemployment and that’s on top of the fallout of the oil and gas sector’s downturn in 2014. However, Calgary’s housing market performed above expectations in the second half of last year. So all things considered – a 5% rise won’t be so bad all in all.

Flat is OK – For Now

Even if the Calgary real estate market only stays flat, that’s still a very positive outcome considering what was forecasted to happen to prices in the city. Naturally, homeowners there have the same interest in their equity as Canadians elsewhere do. One thing that has been beneficial is how few listings and low inventory on the market have buoyed it somewhat.

This also might be what’s prevented prices from decreasing in a city that was struggling with joblessness even before the pandemic triggered lockdowns across the country starting about nearly one year ago. If people are selling homes because the homes are priced properly, then there’s reason for optimism and Calgary real estate experts say this is currently the same situation for the most part.

It’s also true, however, that more than a few homeowners are selling their houses for less than they paid for them, and especially if they bought them before 2014. Homes can be found for under $600,000-700,000, but it’s about listings and supply keeping the market relatively balanced. That’s the work of interest rates for the most part.

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