The Canadian housing market is starting to wake up as the volume of activity will rise slowly in the coming weeks, and the real shape of the market will be unveiled, says a new report released Friday by CIBC Economics.
“The housing market was basically frozen in April. Both sales and new listings were down by just under 60 per cent, resulting in a relatively stable sales-to-listing ratio and a muted price response. Naturally, all provinces experienced similar trajectories There are clear early signs that the market is starting to warm up. Activity in the first two weeks of May was notably stronger than in the first two weeks of April, and as the economy starts to open, that pace will accelerate,” said the report.
“With the increased volume of transactions, the real shape of the market will be gradually revealed. We expect that many conflicting factors will result in a softer market . . . We also suggest that the housing market will see an increased divergence between mid/low priced units and the more expensive segment of the market. That trend is already evident.
“The Canadian Real Estate Association (CREA) uses two price indexes: an unweighted index that reports the average price as is, with no adjustments. The other index, the benchmark index, captures the price change of similar units, and therefore accounts for any compositional impact on prices. Accordingly, when the price reported by the simple index falls by more than the benchmark index, a compositional shift towards less expensive units is occurring. And that’s exactly what we are seeing now. In fact, the gap between the two measures is currently at a record low.”
This trend is driven primarily by demand factors, said the CIBC.