Canada’s Real Estate Bubble Is So Big A $91k Price Drop Only Wipes Out 3 Months

Just how big is Canada’s real estate bubble? Canadians, especially in the real estate industry, are already warning rate hikes are damaging the economy. While large price drops sound scary, no one had realized how scary large price gains had become. A typical home can drop the equivalent of a median household’s income, and only roll back to last December — wiping out just 3 months of gains.

If Canadian Home Prices Drop $91k, They’ll Only Wipe Out Q1 Gains

Canadian home prices would need to make a nearly six-digit drop to reverse just the gains made this year. The composite benchmark for a home across the country reached $887,100 in March, up $91,600 from December 2021. Not a mistake. That’s the increase over just the first 3-months of the year — an average of $30k/month, according to CREA.

A correction is a price drop of 10% or more, but less than 20% (which makes it a crash). Home prices need to fall 10.3% just to roll back the gains made in the first 3-months of 2022.

Housing Markets Can Fall Up To $128k & Only Roll Back To December

Canadian real estate markets can lose tens of thousands and only reverse a quarter’s worth of gains. Oakville-Milton ($128,200), Kitchener-Waterloo ($73,200), and Hamilton Burlington ($59,300) advanced the most in the first quarter of 2022. No one found it concerning when Oakville prices jumped $10k/week. But minor price drops are now ruffling feathers. Funny how that works.

This year, Canada’s Big 3 real estate markets made huge gains; they look modest beside the rest of the bubble. Toronto’s home prices could lose $51,900 from the March high and only have reversed Q1 2022. Vancouver home prices advanced less than half the amount ($25,000) of Toronto, being the modest city it is. Montreal ($12,300) looks almost normal-ish in contrast.

A Few Housing Markets Have Already Rolled Back To December 2021

Some Canadian real estate markets have already rolled back to prices at the end of 2021. Saint John (-$4,400), Bancroft (-$2,800), Fredericton (-$2,500), St Johns (-$700), PEI (-$500), and Saskatoon (-$400) are all below last December’s prices. Not by much, but credit conditions are tightening, not easing. This will provide pressure to the downside for home prices.

Only minor price drops have occurred, and the sob stories have already begun to make the rounds. Policymakers let Canadian real estate get so out of hand, significant drops in price aren’t enough to make cities affordable. This was true even before 2022 began, but the past few months have been absurd. Home equity can drop a whole year of income and only reverse 3-months of bubble economics.

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  • Just browsing the Market for now. 3 months ago

    [removed for privacy] STREET, TORONTO, ONTARIO was listed for $2 million for several months, and had a price drop a couple weeks ago, and is now lowered to only $1,599,900. Might be a good buy for someone who is looking for something like that?

    There are probably lots of individual price drops, even though the “median” or “average price” is only down a bit, It’s still expensive to buy a house, but there are price drops, if you look around the Realtor.ca website.

  • Agent bob 3 months ago

    The government needs to really go after money launderers and begin to conficate properties that prove to be bought with dirty money as is now done in Britain.
    Start changing a minimum of 10 % peryear on the 1.400.000 million vacant homes and see how fast they put them up for sale.
    These two methods will bring down prices to a more affordable level.
    It would mostly only affect investors , and money launderers .
    Home owners would not be affected that much except not being able to use their home as an ever increasing ATM.

    • Kevin 3 months ago

      Excellent ideas, for any home not lived in by the owner, less than 50 percent of the time.

  • Harold king 3 months ago

    The bank of canada is more worried about 29% of the population with multiple properties than common Canadians who pay rent that is double the price of the 29% mortgage payment. That doesn’t make sense at all

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