Canadian Housing Update 10: GTA Prices Spike in February

GTA Prices Spike in February! But so do Listings

The housing market is getting back up and running after taking the last two months off. This is the normal seasonal trend as buyers and sellers are too busy with the holiday seasons of December and January. 

There was a price spike in February, giving signs of hope for the Canadian Housing market. Specifically, the GTA saw a large uptick in the median price rising about 11% for February. This was mostly concentrated in the Townhouse and Condo Markets, as detached home prices remained stable. This does seem to be the case across many cities, with buyers targeting Townhomes and Condos. 

Key Data Points

Spike in Median Housing - GTA +11% and GVA +3%

Days on Market Falls to Normal Levels - GTA - 24 days and GVA - 28 days

Total Sales vs. February 2023 - GTA +2% and GVA -36%

Topics

GTA 11% Price Spike

Homes Sales Still Low, Especially in GVA

Mortgage Rates

GTA 11% Price Spike

We did say last month that Central Toronto was better priced but very few would have predicted a spike of around 11% across the GTA. This increase was mostly led by an increase in Townhome and Condominium prices, while Detached remained more flat. While this is very encouraging, take this with a grain of salt. Housing activity is still low, and we are coming off a December and January in which housing dropped around 7% combined. Pricing in the winter months can be very volatile.

Price spikes are nice but large movements in price do happen when sales are seasonally low (November, December, January, and February), the true test is the next 6 months.

This does appear to be a regular February in terms of sales but an increase in listings, which has been higher than normal. It appears more people are listing than in previous years.

Home Sales Still Low, Especially in GVA

Housing sales remain tame which is common for the season. The GTA sales are like November of 2023, but the Greater Vancouver Area (GVA) is seeing a decrease in homes sold from January. In Vancouver, there has also been a small increase in supply which leads to further concern about the state of their housing market. This has brought the 10-year return on GVA housing to a modest 58% or about 4.6% per year.

In the GTA, sales were stronger than in January but still low. Supply did come on stronger than in previous Februarys. Compared to last February listings are up about 30%. This will be interesting to watch, to see if we exceed the previous high of 20,000 homes listed in October of last year.

Mortgage Rates Dropped Again

Mortgage Rates dropped again this month. With the 5-year dropping about 0.20% and the shorter term (2-4 years) staying the same. This comes with a slight increase to the 5-year government bond to which these rates are tied. The 5-year Government Bond yield is currently at about 3.60% and the 5-year fixed is usually between 0.80% and 1.20% higher than that. This means we are likely to see the 5-year mortgage rates below 5% going forward unless this rate were to spike.

The largest growth factor for January in the CPI report was mortgage interest cost. If the banks decide to lower rates, this could help bring down inflation. Inflation is closing in on 2% and significant decreases in mortgage rates could push it below and signal more rapid rate cuts in Canada. This feels like a chicken-and-egg scenario.

Summary

The last few months showed stronger seasonal buying but even stronger listing across the country. Normally, this is not a recipe for rising prices in a supply/demand dynamic, which is puzzling why prices rose so much. That being said, the real test is the next 3-5 months or the Spring/Summer Season. Starting in March real estate should be ramping up and this will give you a true idea of the buying and selling appetite in Canada.

Sincerely,

Justin, Konrad, and Merriel

More articles and information are available at www.knowprotectgrow.com 

Content Sources: Bloomberg, Trading Economics, Yahoo Finance, BCA Research

Disclaimer: This newsletter is solely the work of Konrad Kopacz and Justin Lim for the private information of their clients. Although the author is a registered Investment Advisor with Echelon Wealth Partners Inc. (“Echelon”) this is not an official publication of Echelon, and the author is not an Echelon research analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and they have not been approved by, and are not necessarily those of, Echelon.

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