The average home price hit a record high of $748,450 in January, up 21% from last year

Cold weather did little to cool Canada’s scorching housing market in January, with new data on Tuesday showing average home prices have risen 21% over the past year to reach $748,450, the highest on record.

The Canadian Real Estate Association (CREA), which represents more than 100,000 real estate agents across the country, said on Tuesday that the volume of homes sold had plateaued, largely due to a lack of inventory. But prices continue their record ascent.

After a brief lull at the start of the pandemic, the Canadian housing market has been on fire for almost two years now, as buyers have taken advantage of historically low interest rates to buy bigger and more expensive homes.

January is generally a slow month for the housing market as buyers and sellers tend to sit on the sidelines until spring. But COVID-19 has wiped out those seasonal patterns: January 2021 was the busiest January on record for home sales, according to CREA, and 2022 was the second busiest ever.

CREA notes that the average selling price can be misleading, as it can be skewed by sales in large, expensive markets like Toronto and Vancouver. So the Realtor Group touts a second figure, known as the Multiple Listing Service (HPI) Home Price Index, as a better gauge of the market, as it’s adjusted for the type of home sold on each market.

But the HPI, too, has never been so high. It rose 2.9% in January alone – another record high. And on a yearly basis, that’s up 28% – also the highest ever.

While house prices are up sharply everywhere, they are not rising at the same pace across the country. Ontario and British Columbia are the main contributors to the increase, with some markets in both provinces posting 30% gains over the past year.

This contrasts with the Prairies, where prices have risen about 10% in Alberta, Saskatchewan and Manitoba since last January.

Some buyers try to take advantage of this imbalance by switching from expensive markets to relatively cheap ones. Calgary real estate agent Ezra Malo says he is currently seeing an influx of buyers from outside Alberta.

WATCH | A Calgary real estate agent explains the city’s real estate market right now:

Calgary real estate agent describes the hot market

Ezra Malo says sales are booming in Calgary, thanks in part to an influx of buyers from across the country. 0:35

“We have … a wave of buyers who seem to be coming from out of province, as well as a lot of first-time home buyers trying to get in,” he said.

Mike Moffatt, senior director of the Smart Prosperity Institute, says the housing market appears firmly in the midst of what he calls an “affordability crisis.”

“Even the existing owners are looking at the current situation and saying, ‘This doesn’t make sense, this can’t be healthy,’” he told CBC News in an interview. “Things are a little less zero-sum than they were three or four years ago and I think there’s more of a broad consensus to do something.”

While many have blamed historically low interest rates for inflating a bubble, CREA says the bigger problem is that there simply aren’t enough homes for sale right now to meet the request.

The total inventory of homes for sale on CREA’s online database, the multiple listings service, was just 1.6 months in January, meaning that’s about as long as it takes to sell currently listed homes. This ties the lowest level ever recorded.

“The ideal situation by summer would be for a huge wave of sellers to come forward to sell,” said CREA chief economist Shaun Cathcart.

“If that were to happen, like in 2021, we would likely see a massive number of sales taking place, which would lead to many frustrated buyers becoming owners, and we would likely see some slowdown on the price growth side.”

Hot rhythm

Nationally, January’s increase was the fastest pace seen since 1989, TD Bank economist Rishi Sondhi noted, which is why the pace likely cannot be sustained.

“Affordability is clearly deteriorating rapidly, which should make it harder for first-time homebuyers to get into the market,” he said. “Looking ahead, we expect higher interest rates and the challenging affordability environment to lead to a significant slowdown in house price growth, particularly in the second half of 2022.”

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