Canadian Home Sales Continued Their Slowdown in June

General Dakota Matias 1 Aug

The Slowdown In Canadian Housing Continued in June

Today the Canadian Real Estate Association (CREA) released statistics showing national existing home sales fell 8.4% nationally from May to June 2021, marking the third consecutive monthly decline. Over the same period, the number of newly listed properties fell 0.7%, and the MLS Home Price Index rose 0.9%, a marked deceleration from previous months.

Activity nonetheless remains historically high, but in contrast to March’s all-time record, it is now running closer to levels seen in the first half of 2020. While sales are now down a cumulative 25% from their peak, and below every other month in the last year, June transactions still managed to set a record for that month (see chart below).

For the second month in a row, sales were lower in every province. The steepest drops were in B.C. (-14.6% m/m) and the Atlantic provinces (down a combined 9.8% m/m). In Ontario, sales fell 9.0% m/m. They posted a much smaller 1.9% m/m drop in Quebec.

June’s decline was helped along by stricter stress test rules implemented at the beginning of the month. We expect these rules to continue to weigh on demand in the near term, although the amount of tightening this time around (+46 bps) pales in comparison to early 2018 (+220 bps), the last time the rules were changed.

The actual (not seasonally adjusted) number of transactions in June 2021 was up 13.6% on a year-over-year basis.

“While there is still a lot of activity in many housing markets across Canada, things have noticeably calmed down in the last few months,” said Cliff Stevenson, Chair of CREA. “There remains a shortage of supply in many parts of the country, but at least there isn’t the same level of competition among buyers we were seeing a few months ago.”

 

New Listings

The number of newly listed homes edged back a slight 0.7% in June compared to May. In contrast to the past year’s synchronicity in demand and supply trends, the little-changed national new supply figure in June reflected a mixed bag of results, with about half of local markets seeing gains – welcome news for frustrated buyers.

The national sales-to-new listings ratio was 69.2% in June 2021, the lowest reading since last August. That said, the long-term average for the national sales-to-new listings ratio is 54.6%, so it remains historically high; although, it has been steadily moderating since peaking at 90.8% back in January (see chart below).

Based on a comparison of sales-to-new listings ratio with long-term averages, more than half of all local markets were in balanced market territory in June, measured as being within one standard deviation of their long-term average. The was a significant shift compared to most of the past year which saw a majority of markets well into seller’s market territory.

There were 2.3 months of inventory on a national basis at the end of June 2021, up from 2.1 months in May and up from an all-time record-low of just 1.8 months in March. That said, it is still very much in sellers’ market territory. The long-term average for this measure is a little over 5 months.

 

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose 0.9% month-over-month in June 2021, continuing the trend of decelerating month-over-month growth that began in March. That deceleration was initially seen more so on the single-family side; although, that trend is now also playing out in the townhome and apartment segments.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 24.4% on a year-over-year basis in June. Based on data back to 2005, this was another record year-over-year increase; although, given how price growth took off in July of last year, this June 2021 reading may end up being the peak for year-over-year growth.

Looking across the country, year-over-year price growth is averaging around 20% in B.C., though it is lower in Vancouver and higher in other parts of the province. Year-over-year price gains in the 10% range were recorded in Alberta and Saskatchewan, while gains are closer to 15% in Manitoba. Ontario is seeing an average year-over-year rate of price growth in the 30% range, however, as with B.C., gains are notably lower in the GTA and considerably higher in most other parts of the province. The opposite is true in Quebec, where Montreal is in the 25% range and Quebec City is in the 15% range. Price growth is running a little above 30% in New Brunswick, while Newfoundland and Labrador are in the 10% range.

 

 

Bottom Line

Since peaking in March, home sales are down 25% from the inferno levels early this year, but demand is still historically strong. Despite the steep pullback, seasonally adjusted sales are roughly 18% above pre-pandemic trends. When the economy opens fully and immigration resumes, the underlying fundamentals for housing demand will rise, especially as university students return to campus living, and adult children move into their own nests.

Sales activity will continue to gradually cool over the next year, but it will take higher interest rates to soften the housing market in a meaningful way.

Condo sales in markets such as Toronto and Vancouver have picked up from their pandemic lows in recent months. This is the polar opposite of what happened earlier in the pandemic, when sales of relatively expensive detached units dominated, raising average prices. Moving forward, if condos consume a rising share of the overall sales pie (perhaps through strong demand for these units, slowing sales of detached houses, or some combination of both), compositional effects could continue to weigh on average prices.

 

Source: SherryCooper.com/category/articles/

Another Weak Canadian Jobs Report For May.

General Dakota Matias 7 Jun

Canada’s Jobs Recovery Derailed By Third-Wave Restriction

This morning, Statistics Canada released the May 2021 Labour Force Survey showing another contraction in employment, albeit not as dramatic as in April.  With the geographical broadening in lockdown restrictions in May, employment fell by 68,000 (-0.4%), but almost all of the decline was in part-time work. 

The number of self-employed workers was virtually unchanged in May but remained 5.0% (-144,000) below its pre-pandemic level.

Among people working part-time in May, almost one-quarter (22.7%) wanted a full-time job, up from 18.5% in February 2020 (not seasonally adjusted).

The number of Canadians working from home held steady at 5.1 million. This is similar to the number of telecommuters in the spring of last year.

After falling in April, total hours worked were little changed in May.

Employment in the goods-producing sector dropped for the first time since April 2020, with decreases in both the manufacturing and construction industries. Ontario and Nova Scotia were the only provinces to register declines in total employment.

Employment increased in Saskatchewan, while there was little change in all other provinces.

UNEMPLOYMENT LITTLE CHANGED

The unemployment rate was little changed at 8.2% in May, as the number of people who searched for a job or who were on temporary layoff held steady. The unemployment rate remained lower than the recent peak of 9.4% seen in January 2021 and considerably lower than its peak of 13.7% in May 2020.

The unemployment rate among visible minority Canadians aged 15 to 69 rose 1.5 percentage points to 11.4% in May (not seasonally adjusted).

Long-term unemployment—the number of people unemployed for 27 weeks or more—held relatively steady at 478,000 in May.

Full-time employment was little changed in May, following a decline of 129,000 (-0.8%) in April. Before April, full-time employment had steadily trended upwards, following the low in April 2020. In May 2021, the number of full-time workers was down 1.9% (-303,000) from its pre-pandemic level.

PRIVATE SECTOR EMPLOYEES IN SALES AND SERVICES MOST AFFECTED BY RESTRICTIONS

The number of private-sector employees declined by 60,000 in May (-0.5%), adding to losses observed in April (-204,000; -1.7%). This followed employment gains totalling 427,000 in February and March 2021—demonstrating the extent to which employment for this group of workers has been affected by the easing and tightening public health measures introduced to contain the COVID-19 pandemic.

Compared with February 2020, the number of private-sector employees was down 564,000 (-4.6%), with the gap driven mostly by declines in the number of people working in the accommodation and food services industry, particularly those working in sales and services occupations (not seasonally adjusted).

EMPLOYMENT IN CONSTRUCTION FALLS WITH TIGHTENING OF PUBLIC HEALTH RESTRICTIONS IN ON

Employment in construction fell by 16,000 (-1.1%) in May, driven by declines in Ontario, where public health restrictions affecting non-essential construction were implemented on April 17. The decrease brought the number of workers in construction down to 3.7% (-55,000) below pre-COVID levels.

Bottom Line 

With the easing of COVID restrictions beginning this month, we expect a sharp bounceback in job creation starting in the next employment report. The potential for a sharp rebound and a faster-than-expected full recovery has already prompted the Bank of Canada to start tapering its stimulus with reduced bond buying. Markets are expecting rate hikes by the Bank to begin next year.

Canada’s economy remains 571,100 jobs shy of pre-pandemic levels. The unemployment rate was below 6% before the pandemic.

The Canadian jobs report coincided with the release of U.S. payroll numbers, which increased by 559,000 last month — short of an expected 675,000–but well above the surprisingly weak job growth in April.

 

Please Note: The source of this article is from SherryCooper.com/category/articles/

Bank of Canada Holds Rates Steady, But Pares Bond-Buying Program

General Dakota Matias 22 Apr

Bank of Canada Scales Back Bond Buying

April 21st 2021, the Bank of Canada held its target for the overnight rate at the effective lower bound of ¼ percent. The Bank is also adjusting its bond-buying program from weekly net purchases of Government of Canada (GoC) bonds of $4 billion to $3 billion. This adjustment to the amount of incremental stimulus being added each week reflects the progress made in the economic recovery.

Finally, the Bank now suggests that the remaining slack in the economy could be fully absorbed by the second have of 2022–rather than 2023, suggesting that they may begin raising overnight interest rates before the end of next year. The Bank went on to aver that this timing is more uncertain than usual, however, given the uncertainty around potential output and the highly uneven impacts of the pandemic.

The Bank of Canada now believes that first-quarter growth in Canada is considerably stronger than they were expecting back in the January Monetary Policy Report (MPR). This partly reflects a better global backdrop, particularly in the United States. The US recovery is supported by a rapid rollout of vaccines and substantial fiscal stimulus, bringing spillover benefits to Canada through higher demand for exports and stronger commodity prices.

“But the most important factor in the unexpected economic strength has been the resilience and adaptability of Canadian households and businesses. Lockdowns through the second wave had much less economic impact than they did through the first wave. The economy bounced back quickly with the eased restrictions posting substantial job gains in February and March. The third wave is a new setback, and we can expect some of these job gains to be reversed. But the performance of the economy in recent months has increased our confidence in the underlying strength in the recovery.”

The Bank went on to say, “With the vaccine rollout progressing, we are expecting strong consumption-led growth in the second half of this year. Fiscal stimulus from the federal and provincial governments will also make an important contribution to growth. Strong growth in foreign demand and higher commodity prices are expected to drive a solid rebound in exports and business investment, leading to a more broad-based recovery. Overall, we now project that the economy will expand by around 6½ percent this year, slowing to about 3¾ percent in 2022 and 3¼ percent in 2023.

Over the next few months, inflation is expected to rise temporarily to around the top of the 1-3 percent inflation-control range. This is largely the result of base-year effects—year-over-year CPI inflation is higher because prices of some goods and services fell sharply at the start of the pandemic. Also, the increase in oil prices since December has driven gasoline prices above their pre-pandemic levels. The Bank expects CPI inflation to ease back toward 2 percent over the second half of 2021 as these base-year effects diminish, and inflation is expected to ease further because of the ongoing drag from excess capacity. As slack is absorbed, inflation should return to 2 percent on a sustained basis sometime in the second half of 2022.

BANK OF CANADA “FORCED” TO TAPER

When the pandemic first hit, the BoC bought government securities, providing liquidity to assure the full functioning of the market. As liquidity conditions in the Government of Canada (GoC) bond market improved, the primary objective of central bank bond purchases shifted toward a focus on monetary stimulus. The quantitative easing (QE) purchases of bonds continue to put downward pressure on borrowing rates, supporting economic activity. QE also reinforces monetary stimulus provided by the Bank’s forward guidance. This guidance has committed to holding the policy interest rate (the overnight rate) at its effective lower bound until economic slack is absorbed, so the inflation target is sustainably achieved.

The Bank’s total ownership of GoC bonds outstanding has increased to about 42 percent. Since March 2020, the Bank has purchased more than 35 percent of total sovereign bonds outstanding, a higher percentage than other central banks (see chart below). Considering the size of Canada’s bond market and its economy, this means that the Bank has provided an extraordinary amount of stimulus. The Bank must continue to taper its purchases to ensure sufficient tradeable GoCs are available for longer-term institutional investors–such as insurance companies and pension funds–that must hold triple-A debt to offset their long-term liabilities.

BANK OF CANADA ASSESSMENT OF THE HOUSING MARKET

In today’s MPR, the Bank of Canada included an assessment of the drivers of the strength in Canadian housing:

  • Demand has been supported by relatively high disposable incomes and low mortgage rates.
  • While job losses have risen during the pandemic, they have been concentrated among low-wage earners who tend to rent their homes rather than buy them.
  • Remote work and more time spent at home have led to stronger demand for larger, single-family homes and housing in suburban and rural areas.
  • One implication of this shift in demand is a pickup in new housing construction in regions with fewer supply constraints, such as limited availability of land.
  • Over the past year, the pace of construction has been hampered by containment measures and shortages of materials and skilled workers. These factors are also putting upward pressure on construction costs.
  • Some potential sellers have been reluctant to show their homes during the pandemic.
  • Over time, supply is expected to adjust. A large number of building permits have been issued, with a growing share for single-family homes. Housing starts have also risen significantly in recent months, most notably in rural areas.

The Bank remains concerned about extrapolative expectations leading to overheated price increases and speculative activity (see chart below). They welcome the proposed changes to the Guideline B-20 by the Office of the Superintendent of Financial Institutions to help reduce these risks.

BOTTOM LINE

This was a significant BoC announcement, suggesting a turning point in their thinking. The worst of the pandemic is over, the economy has been remarkably resilient, and the Bank can now see the light at the end of the tunnel. That light is now expected in the second half of 2022, rather than 2023. Although the policy rate will remain at its effective lower bound until then, the central bank has already begun to pare back its GoC bond buying.

Some of the Bank’s optimism reflects the comparative strength of the US economy, which is way ahead of Canada’s vaccine distribution.* The spillover effects of that are meaningful in terms of Canadian exports. The fiscal stimulus evident in this week’s federal budget also provides a ballast for the economy. Although an estimated 425,000 people are still insufficiently employed and the third wave containment measures and vaccine rollout are unpredictable, the Bank is more confident now than any time in the past thirteen months that we will attain full-employment by late next year.

*As of April 20, nearly 25% of the US population has been fully vaccinated and 39% have received at least one vaccine. In comparison, as of April 20, only 2.5% of the Canadian population has been fully vaccinated and 25.4% have had one vaccine.

Canadian Economy Ended 2020 On An Extremely Upbeat Note.

General Dakota Matias 3 Mar

Strong Canadian Economic Growth in Q4 and January

This morning’s Stats Canada release showed that economic growth in the final quarter of last year was a surprisingly strong 9.6% (annualized). The surge in growth in January was even more interesting, estimated at a 0.5% (not annualized) pace. If these numbers pan out, it means that Canada did not suffer a contraction during the second wave and ensuing lockdown.

The January figure is noteworthy in that retail sales plunged as nonessential stores were closed in key parts of the country as we faced surging numbers of COVID cases. The strength came from resources, housing and government spending and the mild weather likely helped.

At its last meeting in January, the Bank of Canada (BoC) estimated that Q4 growth would come in at 4.8% (half the actual 9.6% pace) and that there would be a net contraction in Q1 of this year. The strength in Q4 emanated from very hot housing, some business investment in machinery, government outlays and a resurgence in inventory accumulation. Inventory build-up is often seen as a negative sign reflecting weak consumer spending. But maybe firms were preparing for a considerable rebound in demand.

Economists on Bay Street are upwardly revising their growth forecasts for this year, and no doubt the BoC will do so again when it meets next Wednesday. Clearly, the economy has been more resilient than expected. Will that change the Bank’s assessment of the continued need for monetary stimulus? Probably not. But it will likely temper their view that the next rate hike will not be until 2023, a sentiment the BoC has asserted regularly in the past.

 Consumer spending was weak at the end of last year, not surprisingly given many stores were closed and a stay-at-home order was in place in several highly populated areas. Households have been hoarding cash. The savings rate declined to 12.7% in Q4 from as high as 27.8% earlier in the year, but that is still way above normal. Accumulated savings will provide a backstop for robust consumer spending once the economy opens up.

For all of 2020, the Canadian economy contracted by 5.4%–a substantially harder hit than in the US, which posted a 3.5% decline.

 Bottom Line

The stronger-than-expected economy raises the potential that there is enough stimulus in the economy. The Trudeau government appears to be determined to hike government spending meaningfully in the next federal budget (likely coming this Spring). We know it is the government’s predilection to juice the economy for another couple of years, but that could well deserve a rethink.

Interest Rates & Commodity Prices Surge On Economic Rebound Optimism.

General Dakota Matias 2 Mar

Canadian 5-Year Bond Yield Surges!

In an unprecedented move, bond yields are spiking around the world. Yields globally are now at levels last seen before the coronavirus spread worldwide. At the same time, commodity prices are surging, including energy, metals and minerals, agricultural products and lumber. The Biden administration’s $1.9 trillion stimulus package is has triggered fears that if the US economy returns to full employment too quickly, inflation might be the result.

Central banks have attempted to soothe markets, with European Central Bank chief economist Philip Lane saying the institution can buy bonds flexibly. Fed Chair Jerome Powell called the recent run-up in yields “a statement of confidence” in the economic outlook. Bank of Canada Governor Tiff Macklem told us earlier this week that it’s a long road to recovery for the Canadian economy. The Bank of Canada will continue to provide support every step of the way. Many Bay Street economists took this to mean that he reinforced the BoC’s commitment to keeping the policy rate at its effective lower bound of 25 bps until sometime in 2023.

These global developments have sideswiped Canada. On Tuesday, I warned that the 5-year government bond yield had risen 27 bps to 0.69% since the beginning of this month, shown in the first chart below. This morning, the rise has become exponential, hitting 1.00%, shown in the second chart.

Keep in mind that Canada’s economy has considerable slack with unemployment rising in recent months and the lockdown continuing for at least a couple more weeks in the GTA. Moreover, Canada has fallen far behind other countries in the vaccine rollout. But there is no denying that pent-up demand in Canada is high. Not only have home sales been breaking records, but auto sales and anything housing-related–such as Home Depot earning growth–have skyrocketed.

Savings rates are high, and the big banks have reported a surge in deposit growth as consumers squirrel away those savings. Remember, the Roaring Twenties was a response to the 1918 Pandemic, more than anything else.

The CRB commodity price index, shown below, is on a tear, and the gains are in every sector except gold and orange juice. That means that new home construction costs are also rising, as home sales remain well above listings.

Bottom Line

It’s time to lock-in mortgage rates. For those in the market, preapprovals are prudent. Rising rates will likely trigger more housing activity in the near-term as those thinking of buying might move off the sidelines, pushing prices higher over the first half of this year.

The surge in interest rates would undoubtedly stall or reverse if we see a third wave of new variant COVID cases in advance of a full rollout of the vaccines in Canada. However, there is enough monetary and fiscal stimulus in global markets, and oil prices are expected to continue to rally sufficiently that an ultimate rise in interest rates cannot be far off. This is indicated by the loonie moving to a near a 3-year high.

Canadian Home Sales Hit An All-Time Record High in January.

General Dakota Matias 16 Feb

Housing Continued to Surge in January

Today the Canadian Real Estate Association (CREA) released statistics showing national home sales hit another all-time high in January 2021. Canadian home sales increased 2.0% month-on-month (m-o-m) building on December’s 7.0% gain. On a year-over-year (y-o-y) basis, existing home sales surged 35.2%. As the chart below shows, January activity blew out all previous records for the month.

The seasonally adjusted activity was running at an annualized pace of 736,452 units in January, significantly above CREA’s current 2021 forecast for 583,635 home sales this year. Sales will be hard-pressed to maintain current activity levels in the busier months to come, absent a surge of much-needed new supply; However, that could materialize as current COVID-19 restrictions are increasingly eased and the weather starts to improve.

A mixed bag of gains led to the month-over-month increase in national sales activity from December to January, including Edmonton, the Greater Toronto Area (GTA), and Chilliwack B.C., Calgary, Montreal and Winnipeg. There was more of a pattern to the declines in January. Many of those were in Ontario markets, following predictions that sales in that part of the country might dip to start the year with so little inventory currently available and many of this year’s sellers likely to remain on the sidelines until spring.

Actual (not seasonally adjusted) sales activity posted a 35.2% y-o-y gain in January. In line with activity since last summer, it was a new record for January by a considerable margin. For the seventh straight month, sales activity was up in almost all Canadian housing markets compared to the same month the previous year. Among the 11 markets that posted year-over-year sales declines, nine were in Ontario, where supply is extremely limited at the moment.

CREA Chair Costa Poulopoulos said, “The two big challenges facing housing markets this year are the same ones we were facing last year – COVID and a lack of supply. It’s looking like our collective efforts to bring those COVID cases down over the last month and a half are working. With luck, some potential sellers who balked at wading into the market last year will feel more comfortable listing this year.”

New Listings

The dearth of new listings continues to be the biggest problem in the housing market. As we move into the spring market and continue to see fewer COVID cases, the likelihood is that new supply will emerge. But for now, the number of newly listed homes plunged 13.3% in January, led by double-digit declines in the GTA, Hamilton-Burlington, London and St. Thomas, Ottawa, Montreal, Quebec and Halifax Dartmouth.

With sales edging higher and new supply falling considerably in January, the national sales-to-new listings ratio tightened to 90.7% – the highest level on record for the measure by a significant margin. The previous monthly record was 81.5%, set 19 years ago. The long-term average for the national sales-to-new listings ratio is 54.3%.

Based on a comparison of sales-to-new listings ratio with long-term averages, only about 20% of all local markets were in balanced market territory in January, measured as being within one standard deviation of their long-term average. The other 80% were above long-term norms, in many cases well above. This was a record for the number of markets in seller’s market territory.

There were only 1.9 months of inventory on a national basis at the end of January 2021 – the lowest reading on record for this measure. At the local market level, some 35 Ontario markets were under one month of inventory at the end of January.

Low available supply is the reason property values will continue to go up. Strong demand pre-pandemic and the historic market rally since summer have cleaned up inventories in many parts of the country. Relative to the 10-year average, active listings had plummeted between 50% and 61% in Ontario, Quebec and most of Atlantic Canada, and 29% in BC by the late stages of 2020. And that’s despite a surge in downtown condo listings since spring in Canada’s largest cities. With so few options to choose from (outside downtown condos), buyers will continue to compete fiercely. Buyers in the Prairie Provinces, and Newfoundland and Labrador, however, will feel less pressure to outbid each other given supply isn’t quite as scarce in these markets.

Home Prices

Viewed from another angle, sellers enter 2021 holding a powerful hand when setting prices in most of Canada. We see this continuing during most of 2021. We expect provincial sales-to-new listings ratios—a reliable gauge of price pressure—to generally stay above the threshold (0.60) where sellers have historically yielded more pricing power. In several cases (including BC, Ontario and Quebec), ratios are well above the threshold, providing plenty of buffer against demand-supply conditions flipping in favour of buyers.

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose by 1.9% m-o-m in January 2021. Of the 40 markets now tracked by the index, prices were up on a m-o-m basis in 36.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 13.5% on a y-o-y basis in January – the biggest gain since June 2017.

The largest y-o-y gains – above 30% – were recorded in the Lakelands region of Ontario cottage country, Northumberland Hills, Quinte & District, Tillsonburg District and Woodstock-Ingersoll.

Y-o-y price increases in the 25-30% range were seen in Barrie, Niagara, Grey-Bruce Owen Sound, Huron Perth, Kawartha Lakes, London & St. Thomas, North Bay, Simcoe & District and Southern Georgian Bay.

Y-o-y price gains followed this in the range of 20-25% in Hamilton, Guelph, Oakville-Milton, Bancroft and Area, Brantford, Cambridge, Kitchener-Waterloo, Peterborough and the Kawarthas, Ottawa and Greater Moncton.

Prices were up 16.6% compared to last January in Montreal. Meanwhile, y-o-y price gains were in the 10-15% range on Vancouver Island, Chilliwack, the Okanagan Valley, Winnipeg, the GTA and Mississauga. Prices rose in the 5-10% range in Victoria, Greater Vancouver, Regina and Saskatoon. Home prices were up 2% and 2.2% in Calgary and Edmonton, respectively.

Bottom Line

The rollercoaster that was 2020 left Canada’s housing market more or less where it started the year: full of bidding wars, escalating prices and exasperated buyers unable to find a home they can afford. The pandemic changed some dynamics—it drove many buyers to the suburbs, exurbs and beyond, ground immigration to a virtual halt, triggered a downturn in big cities’ rental markets and caused households to build up their savings—but it didn’t dial down the market’s heat.

The marked shift in housing strength from urban centres–Toronto, Vancouver, Montreal–to perimeter cities is ongoing. For example, Toronto’s prices are up ‘only’ 11.9% y-o-y, but Barrie (+27%) and London (26%) have far outpaced these gains.

Condo price growth has slowed to just 3.1% y-o-y, or a record 14.3 percentage points below the price gains in single-detached homes. That’s by far the widest gap in 20 years and reflects the hunt for space and social distancing.

Housing starts (reported yesterday by CMHC) surged to 282,428 annualized units in January, the second-highest monthly posting since 1990. This figure could be distorted upward by the unseasonably mild January weather in much of the country. But the new high in starts is in line with record sales and solid building permits.

For policymakers, it doesn’t appear that there’s much interest in leaning against a sector that is helping to prop up the economy, especially with years of tightening mortgage rules already in place.

There appears to be little on the horizon to stop sales or prices from reaching new heights in 2021. Yet, cooling signs will emerge as the year progresses, which will come into fuller view next year. The foremost restraining factors will be a rise in new listings, waning pandemic-induced market churn, a modest creep-up in interest rates and an erosion of affordability. Call it a 2022 soft landing.