Canadian home sales dropped 14 per cent in March as COVID-19 crisis shuts down economy

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Home sales across Canada slumped in the second half of March and deteriorated further in early April, as the coronavirus pandemic shut down activity and thousands of jobs disappeared.

Last month, 41,151 homes were sold on a seasonally adjusted basis. That was down 14 per cent from 48,240 in February, according to the Canadian Real Estate Association (CREA), with activity declining sharply in Toronto, Montreal, Vancouver and the country’s other large markets.

The real estate association said preliminary data from the first week in April suggest both sales and new property listings were only about half of what would be normal for that time of the year.

“As we get further into this quarantine, we are seeing it wind down increasingly,” said Shaun Cathcart, the group’s senior economist.

Sales started plummeting in the second half of March when the federal and local governments restricted activity and warned Canadians to stay at home. In the weeks leading to mid-March, real estate markets in Southern Ontario, Montreal and Vancouver were overheating with buyers competing for properties and driving up prices.

“Home sales and listings were increasing heading into what was expected to be a busy spring," said CREA president Jason Stephen in a statement accompanying the results. "After Friday the 13th, everything went sideways.”

In Alberta, where the economy has struggled since the 2015 oil crash, sales plummeted by 27 per cent in Calgary. In Edmonton, sales dropped by 15 per cent.

In Ontario, it wasn’t just major cities that suffered. Smaller regions that had seen a surge in investor demand also took a hit. Sales in Niagara, which borders the United States, dropped 26 per cent; the Hamilton-Burlington area in Southern Ontario fell by one-quarter. Kitchener-Waterloo, London and St. Thomas also saw double-digit declines.

However, the average selling price of a home across the country rose slightly to $530,433 in March from $527,416 in the previous month. The real estate association said the price growth reflects what was occurring in the first half of March, not the current situation. Calgary and Toronto each recorded a tiny price decline month-to-month, while Saguenay and Sherbrooke in Quebec saw prices ease in the low single digits.

"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,” Mr. Cathcart said.

Although the Bank of Canada cut the benchmark interest rate from 1.75 per cent to 0.25 per cent in March, fixed-mortgage rates are not down as dramatically. This week, lenders started reducing those rates after raising borrowing costs at the end of March. The most popular type of mortgage in Canada, the five-year fixed-rate mortgage, is similar to what it was prior to the pandemic.

The cheaper loans are not encouraging potential home buyers to get into the market. At the same time, fewer homeowners are putting their properties up for sale. The number of newly listed homes declined by 13 per cent in March compared with February. The shortage of listings coupled with the lack of demand could keep prices from spiralling down.

“As much as sales are slowing, so are listings,” Mr. Cathcart said. “The market balance has not changed. It is still tight. It seems like everyone is putting activity on pause.”

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