Pandemic Causes Major Slowdown in Housing

Canada's housing market slowed significantly in March as the COVID-19 pandemic took hold across the country and moved buyers and sellers to the sidelines.

According to the latest Canadian Real Estate Association (CREA) numbers, national home sales dropped 14.3 per cent in March from February. Among some of Canada's largest markets, sales in the Greater Toronto Area were down almost 21 per cent, Calgary sales fell over 26 per cent and Montreal sales were down about 13 per cent. Sales in Greater Vancouver dropped almost 3 per cent.

After a strong start to the month, "everything went sideways," CREA says.

"The numbers that matter most for understanding what follows are those from mid-March on, and things didn't really start to ratchet down until week four. Preliminary data from the first week of April suggest both sales and new listings were only about half of what would be normal for that time of year," says CREA's senior economist in the latest release.

RBC Senior Economist Robert Hogue took an in-depth look at the overall housing market in the latest Monthly Housing Market update from RBC Economics.

Here are some key highlights from the report:

• All major markets in Canada but one – Regina – showed a monthly drop in March.
• April is shaping up to be even quieter: A sneak peek at results for the first week of April showed resales are at about half normal levels across Canada. RBC Economics expects activity to wind down even further as the month progresses.
• Property values are generally holding up: Canada's MLS Home Price Index further accelerated to a year-over-year rate of 6.9 per cent from 5.9 per cent in February.
• We expect both buyers and sellers to lay low while extraordinary pandemic containment measures are in place. This will maintain a certain balance in most markets and help home prices stay afloat.

"March 2020 will go down in history as the month Canada's housing market passed its most dramatic inflection point," Hogue says in the report. "After a strong start – in part fueled by the Bank of Canada cutting interest rates early in the month – activity fell precipitously in the latter half of the month as provincial governments rolled out strict social distancing measures."

RBC Economics expects the housing-market shock to be temporary, with stronger activity resuming once social-distancing measures are eased. Timing for this is uncertain, although RBC Economics is operating with a baseline assumption of sometime in June. "Exceptionally low interest rates will help spur the recovery," Hogue says in the report, but the recovery will depend somewhat on the damage suffered by the labour market.

Overall, RBC Economics is expecting property values to remain strong. "We believe the initial position of strength – current tight demand-supply conditions in most major markets – will provide some cushion against a correction," Hogue says.

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