APRIL SALES LOW BUT PRICES REACH RECORD HIGHS DUE TO LOW SUPPLY
May 5, 2022
With 1,547 sales this month, activity slowed compared to the record high set last April. Despite the slower sales seen in the first four months of this year, it is noteworthy that those 4,873 sales are 30 per cent higher than longer term trends.
“While rising lending rates are likely contributing to some of the pullback in sales, another challenge limiting sales has been the drop in supply choice, especially in the larger markets of the province,” said SRA CEO, Chris Guérette.
New listings in April were 18 per cent lower than last year’s levels and inventories remained 20 per cent lower than last April and over 30 per cent below long-term trends. Lower levels of sales and lower inventory levels prevented any notable change in the months of supply, which remained below four months.
“The months of supply number is an important gage of supply and demand balance in the market and current levels are far lower than what we would expect to see in the market at this time of year. While conditions have been tighter historically, we have not seen market conditions like this for over a decade and it is resulting in further price growth,” said Guérette.
Residential benchmark prices rose to $295,000 in April, two per cent higher than last month and a four per cent gain over last year. Prices have trended up over the past two years and as of this month have reached a new monthly record high for the province.
“Consumers purchasing budgets are shrinking, and the Bank of Canada rate increase has pushed up the mortgage stress test’s qualifying rate. That is going to remove strained buyers from the market, and it’s going to reduce the size of mortgage those who still qualify can get,” said Guérette. “While Saskatchewan still offers some of the most affordable housing in the country, affordability will continue to deteriorate and could lead to a slow-down of the market, despite the many initiatives included in the recent federal budget.”
After the first four months of the year, both Swift Current and Southeast Saskatchewan remain the only areas to see sales activity improve over the previous year. However, despite a pullback in year-to-date sales in other regions, most locations across the province are reporting sales activity that are either consistent or stronger than long-term trends.
When considering the adjustments to supply relative to the sales activity there has been some recent shifts in Melfort, North Battleford and Prince Albert. Each of these regions has experienced a larger pullback in sales relative to the pullback in new listings, resulting in conditions that were not as tight as last year. However, both the months of supply and sales to new listings ratio for these regions remain well below historical levels and all these centers continue to see year-to-date benchmark price growth.
Home prices trended up in April across most of the larger centers in the province, supporting year-over-year gains in all areas except North Battleford and Estevan. Despite some monthly adjustments in North Battleford, on a year-to-date basis prices are still higher than last year’s levels and sitting at a new high for the city. While many other centers have seen prices hit new highs after the first four months of the year, prices are still on a recovery path in Regina, Moose Jaw, Prince Albert, Swift Current, Estevan, Weyburn, and Melville.
City of Saskatoon
Further reductions in April sales have contributed to the year-to-date sales decline of 13 per cent in Saskatoon. However, with 1,513 sales so far this year, this is still far higher than long term averages. Higher lending rates should cool some of the housing demand this year, but sales activity in Saskatoon has also been impacted by a challenging supply scenario. In April, new listings were a mere 665 units, 30 per cent lower than last April and over 18 per cent below typical levels seen at this time of year. The drop in new listings relative to the sales has caused further reductions in inventory levels and ensured the market continues to favour the seller with only two months of supply.
Both Inventories and the months of supply have not been this low for the month of April since 2008. The tighter conditions in the market are weighing on home prices. The benchmark price in April rose to $338,500 reflecting a year-over-year gain of over three per cent and representing a new record high. While price gains have occurred both in the single family and condominium market, year-to-date condominium prices remain below previous highs reported back in 2015.
City of Regina
New listings trended up relative to levels recovered over the past several months, helping support some monthly gains in sales activity. However, both sales and new listings continue to remain lower than the levels reported last year both for the month of April and year-to-date figures. Despite some reductions in sales activity, levels this year are still 37 per cent higher than the long-term average and are more consistent with activity seen prior to 2013.
While new listings have remained consistent with levels traditionally seen in the market, the stronger sales have started to weigh on overall inventory levels. Inventory levels are higher than levels recorded in the market over the past four months, with 1,060 units available in April, inventories are 13 per cent below long-term trends. The stronger sales combined with the current inventory levels has caused the months of supply to stay below three months for the second month in a row. This is exceptional as it has not happened in the Regina market since 2012.
The tighter market conditions are placing upward pressure on prices. As of April, the benchmark price rose to $271,100 reflecting a year over year gain of four per cent. While prices have yet to recover from previous highs, should conditions remain this tight we could continue to see the price gap narrow.
The strong sales compared to inventory levels did cause the months of supply to fall below three months, the first time it has done that since October 2012. While the tighter conditions have had some impact on prices in the market, if the market still is this tight, we could see added pressure on home prices in the coming months.
In March, the benchmark price rose to $264,000, nearly two per cent higher than last year and one per cent higher than last month. The growth in prices helped narrow the spread from the earlier high, but prices continue to remain nearly 13 per cent below the monthly high recorded back in June 2012.