Monday Market Minute | Oct 12, 2020

Housing market ignores the second wave — October sales pace continues at record levels

What Moved

Despite renewed lockdown measures in major markets, the Canadian housing market showed no signs of cooling. CREA data confirmed September sales up 45.6% year-over-year nationally — the sixth consecutive month of year-over-year gains. The national average price exceeded $604,000, up 17.5% from a year earlier. Suburban and exurban markets continued to outperform. New listings improved modestly but remained well below the level needed to rebalance supply and demand. Mortgage rates for five-year fixed terms fell below 1.8% at several lenders — the lowest in Canadian history.

Why It Matters

The housing market's imperviousness to the second wave reflected the dominance of structural drivers over cyclical headwinds. Record-low rates, demographic demand, constrained supply, and the remote work migration were all secular forces that the second wave could not offset. For MIC investors, the environment was ideal — strong borrower demand, rising collateral values, and yields well above the risk-free rate. For private real estate developers, the supply gap meant that any product reaching market was being absorbed immediately.

Signal to Watch

Monitor CMHC mortgage arrears data. If arrears remained stable despite the housing boom, it would confirm that the price increases were supported by genuine demand rather than leveraged speculation.

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