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The pandemic housing recession that never was

It is not just B.C.: housing sales and personal savings have surged across Canada during ‘asymmetric’ recession
Housing sales higher across Canada. | Dan Toulgoet

On May 27, 10 weeks after COVID-19 was declared a global pandemic, Canada Mortgage and Housing Corp. (CMHC) released a doomsday-style housing forecast that envisioned a nightmare collapse of the housing market with national sales dropping up to 29 per cent, starts plunging by from 50 per cent to 70 per cent and average house prices dropping as much as 18 per cent with no real recovery until 2022.

“Canada will see a historic recession in 2020 with significant falls in indicators of the housing market,” stated the Housing Market Outlook special edition spring 2020.

B.C. and Alberta would be especially hard hit, CMHC forecast, because of a reliance on the tourism and travel industry and resource prices.

Never happened.

Instead, as of July, Canadian home sales posted the highest level of any month in history after transactions soared 26 per cent from a month earlier, the fourth straight month-over-month increase, according to the Canadian Real Estate Association. Average home prices were up 14 per cent from 2019.
Home sales in Calgary were 14 per cent higher and they rose 10 per cent in Edmonton from a year before.

B.C. became a stellar performer in the Canadian housing market. July provincewide sales soared 26 per cent from a year earlier and the total sales dollar volume jumped 43 per cent to $7.8 billion.

By August, Metro Vancouver housing sales were up 36 per cent from August of 2019 and nearly 20 per cent higher than the 10-year average for the month. Detached house prices, already the highest in Canada, increased a further 6.6 per cent to nearly $1.5 million.

Remarkably, the Canada-wide sale and price surges occurred not only during a national recession but as CMHC tried to curb the market.

On July 1, the federal housing agency established a minimum credit score of 680 for buyers, up from 600. They also limited gross and total debt servicing ratios and outlawed borrowing funds for a down payment, such as with an unsecured line of credit.

It is not just the housing market that has defied predictions.

Statistics Canada reports that the disposable income of Canadian households jumped nearly 11 per cent from the first to the second quarter in 2020, both a record high. The Canadian household savings rate also climbed to a record high of 28.2 per cent in the second quarter of 2020, eclipsing the previous record of 21.2 per cent in 1982. Meanwhile, household credit market debt as a proportion of household disposable income fell to 158.2 per cent in the second quarter, down from 175.4 per cent in the first three months of 2020.

“This is not a typical recession,” said Brendon Ogmundson chief financial officer of the BC Real Estate Association, which is now predicting that provincial housing sales will end 2020 higher than in 2019.

But he added a caution in a special housing report the association released September 9, noting that the pandemic has hit lower-income Canadians the hardest.

“The asymmetric impact of the recession helps to explain the strength in home sales, but also has serious implications for already troubling trends in inequality and housing affordability. This dichotomy may be a lasting legacy of the COVID-19,” Ogmundson wrote.