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TD Economics | Covid 19 Economic Update

COVID-19 Adds Housing To Its 'Unprecedented' List

  • Canada existing home sales fell an eye-popping 56.8% month-on-month in April. The word unprecedented is getting a lot of use lately, and with good reason – April's drop was more than double the weakest point of the Global Financial Crisis (October 2008: -19.6% m/m). Going even further back and using non-seasonally adjusted data, the 57.6% y/y drop also blows through prior record 46.7% drop in April 1982.
  • The impact was felt evenly across the country as nearly all provinces saw sales activity fall between 40% and 60% month-on-month. The steepest drops were generally in the largest markets: Ontario (-60.6%), Quebec (-63.4%), and B.C. (-55.4%) all saw sales activity more than halved last month.
  • Just as sales fell, so too did listings, down 55.7% month-on-month in April, with the drop-off mapping similarly on a regional basis.
  • This meant that the national sales-to-new listings ratio dropped only modestly, falling to 62.4, a level that would typically be associated markets in seller's territory. This is not a typical time, and this indicator is less useful than normal given markets that appear to be in stasis – Quebec's 101.6 reading, for example, doesn’t appear particularly informative given the context that generated it.
  • Indeed, the average home price fell 10.1% month-on-month in April, with the 'actual' (non-seasonally adjusted) average price falling back to roughly where it stood this time last year (-1.3% y/y). Again, the declines were fairly widespread, with Ontario leading the way (-13.7%).
  • Conversely, the quality-adjusted MLS home price index fell a more modest 0.6% month-on-month, and in a few key markets such as Ottawa (+0.6%) and Regina (+0.4%), price growth remained positive on a 'like-for-like' basis.

Key Implications

  • April's data confirmed what we were all expecting, namely that the pandemic drove sales to historically depressed levels. Not only did buyers retreat to the sidelines in record numbers, so too did sellers. This meant that markets remained in balanced territory overall. The sales-to-listings ratio clocked in at 62.4 in April – in normal times, this "seller's territory" reading would be consistent with positive price growth.
  • These are anything but normal times. Despite the balanced market, average sale prices tumbled 10% in April. However, that figure needs more than a few grains of salt. Composition effects (i.e. weaker activity at the higher end of the market) took on an even bigger role in shaping average prices given the unprecedently low level of transactions. Indeed, with activity shrinking so dramatically and likely to stay depressed for several months, average prices will likely be distorted, and not fully represent broader market conditions. One need only look at the difference between the HPI (a like-for-like measure that fell only modestly in April) and the average sale price to see the size of the distortion.
  • With April in the rear-view, we can start talking about ever so tentative improvements in sales activity as provinces begin to gradually re-open their economies. We do expect sales to remain depressed for a few months longer as job markets slowly improve and buyers remain cautious, but a normalization process is likely already underway.



Brian DePratto, Senior Economist
416-944-5069