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Toronto and Vancouver Home Sales Sink. Mortgage Activity Expected to Follow

May 5, 20
3 mins
Couple moving into their new apartment

The first official housing stats for April are in, and they’re not good.

April was the first full month of COVID-19 lockdowns. During that time:

  • In the Greater Toronto Area
    • Home sales plunged 67% year-over-year to just 2,975
    • New home listings plummeted 69% year-over-year
  • In the Greater Vancouver Area
    • Home sales sank 39.4% to a measly 1,109, their lowest level in nearly 40 years
    • New home listings dove 62.7%.

The real estate board's said that average home prices held their ground, but that’s only if you look year-over-year.

In the GTA, the average price of $821,392 plummeted 11.8% in one month (versus March), says the Toronto Regional Real Estate Board (TRREB). The average price was down 10% from the $921,000 peak reached in 2017.

In Vancouver, the benchmark price for all housing types was $1,036,000, flat from March but down 6% from the $1,104,400 peak.

If you want to be an optimist, TRREB Chief Market Analyst Jason Mercer said this: “While the onset of COVID-19 has understandably shifted market conditions and resulted in average selling prices coming off their March peak, there has continued to be enough active buyers relative to available listings to keep prices in line with last year’s levels.”

Observers say it could still take months for the changing economy and housing markets to have an impact on home prices.

“Real estate's really slow moving, it's sticky,” Steve Saretsky, a realtor at Oakwyn Realty, told BNN Bloomberg. “It's especially hard to judge prices when you have volumes that are the lowest they've been in 35, 40 years.”

What Does this Mean for Mortgage Activity?

Despite the temptation of historically low mortgage rates, mortgage activity—which was already under pressure prior to COVID-19— will skid in the coming quarters, says CIBC.

“With reduced levels of housing market activity, purchasing-related growth in mortgages outstanding is expected to slow notably in the coming quarters, while refinancing activity is expected to accelerate,” CIBC’s Benjamin Tal and Katherine Judge wrote in a research note.

The slowdown in the alternative lending market will be even more “significant” with some lenders potentially unable to renew mortgages in an increasingly illiquid market.

“Furthermore, elevated levels of debt carried by Canadian households will work to amplify the negative shock to incomes seen from job losses, which will be displayed in a notable increase in the number of mortgages in arrears,” they say. However, thanks to the coordinated response from lenders in providing mortgage payment deferrals to borrowers in need, any increase in mortgage arrears isn’t likely to be seen until the end of the year.

In a separate report from TD, the bank’s analysts forecast a drop in new mortgage activity by as much as 35-40% in the second and third quarters of the year, before slowly recovering by year-end.

Steve Huebl

Steve Huebl is the operations manager for RateSpy.com and a regular contributor to RATESDOTCA.

At the age of 15, Steve founded a neighbourhood newsletter that eventually grew to a circulation of hundreds and was supported by over a dozen local advertisers. He later honed his writing and editing talents at The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. He also worked for several years as a chief English writer of the McGill University Health Centre’s marketing office. Born and raised in Toronto, he now calls Montreal home. When he’s not writing about mortgages, Steve can be found appreciating nature — typically along the shores of the St. Lawrence.

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