The Canadian housing market rolled back progress, ending the year worse than 2024. Canadian Real Estate Association (CREA) data shows home prices fell sharply in December. The unusually large drop was accompanied by falling sales and one of the strongest turnouts for sellers on record. The combination suggests the market isn’t firming, but may be kicking off a second leg of corrections.
Canadian Real Estate Prices Enter Second Leg of Correction
Canadian Real Estate Prices: Benchmark (Typical) Home.
Source: CREA; Better Dwelling.
Canadian home prices experienced unusually steep downward pressure last month. The price of a typical home fell 0.7% (-$4.8k) to $660,300 in December, capping the year 4.0% (-$27,400) lower than last year. Close to one-fifth of the annual drop was just December. It also marked the 4th largest drop for the month in the past 20 years, behind 2008, 2022, and 2023. It’s a little optimistic to call this a recovery when progress has rolled back.
Canadian real estate prices are on a fresh downward trend, moving lower for seven consecutive months now. They’ve shed 21.6% (-$181,600) since the all-time high, ending last month at a 58-month low. That’s nearly five years.
Canadian Real Estate Sales Fall, Still Not Back To 2019 Levels
Canadian Real Estate Sales: December.
Source: CREA; Better Dwelling.
Home sales had a relatively small setback last month. CREA reported 26,077 residential sales in December, down 4.5% from last year. For those looking for a positive, it was the second biggest December in the past 4 years. For those living in reality, this is still weaker than 2019, which is remarkable considering how much the population has grown over those 6 years.
Canadian Home Sellers Hit The Market: Second Most Listings In 8 Years
Canadian Real Estate Inventory: New Listings, December.
Source: CREA; Better Dwelling.
One area that did see growth last month? Inventory. There were 28,899 new listings in December, up 0.8% from last year. Except for 2020, Canada hasn’t seen this many sellers hit the market in December since at least 2017. Rushing to sell in the Canadian winter instead of holding out until Spring may speak to the pressure some sellers are facing, especially in investor-dominated markets like Toronto and Vancouver.
We’ll dive into a regional breakdown in the coming days, but this isn’t just a big city problem. Canadian real estate is adjusting after a period in which investors were the primary buyer. With end-users largely priced out of the market, prices are likely to grind lower until investors are back or they return to end-user budgets.
This is the “correction” everyone was waiting for? A 4% drop after doubling isn’t a correction, it’s a fluctuation in price. No one’s budget was just 4% off where this saves their purchase.
Technically 21%, but I can appreciate that home prices are still insanely out of reach for a country that’s been prioritizing “cheap” labour.
$841,800 at the peak in early 2022 is roughly $965k in today’s dollars. Compared to today’s price of ~$660k, that’s a decline of almost 32% in real terms. If it fell another 10% in nominal terms, and we have a few more years of inflation, the real drawdown could exceed 50% (which would roughly match the real drawdown in the early 1980s).
58-month low… so prices are back to where they were in early 2020. Cool. Except wages haven’t moved, and mortgage rates are triple what they were. The ‘discount’ is a myth. The monthly carrying cost is still impossible, and we need at least another 20% cut if the country is going to be normal again.
The real estate market will never be as affordable as it was through the mid- 1990’s to 2010. The prices had not caught up with major markets around the world. The low interest rates after the 2008 financial crisis, that stayed artificially low throughout 2010-2020 helped to fuel the asset inflation, and the market shifted from owner occupied to investor/ST Rental. Now that this has happened, you can’t put the genie back in the bottle. Build new you say? Even if land dropped by 50%, building materials, and labour have gone up at least that. I just put a second floor in my barn, built a chicken coop and a deck, and I swear with what I spend 20 years ago I could have purchased a small cottage!!!
Let’s not forget all the tax increases that erode our paychecks as well…
Like the income tax cut, consumer carbon tax cut, and other incentives for energy efficiency in housing, etc. right? Do those things erode your paycheck? All the promises that other parties said were needed to improve affordability were implemented and yet….hmmmm…no affordability yet. Inflation is back, just like in the mid-1970’s and was rampant in the later 1980’s. It didn’t matter who was in government, if you think governments can just wave that magic wand and fix it, why haven’t all the other governments around the world been able to fix the same issues???
Ahhhh, the one comment section full of common-sense and well thought out analytical statements based on solid facts and opinions based on logic. Thanks, all of you.
The article fails to grasp that there is no Canadian Real Estate Market. There is an amalgam of regional and large urban markets, that are in many cases completely disconnected. Trying to judge what is occurring overall is like talking about the statistician who drowned in a creek with an average depth of 20cm.
People talk about money in real terms like the inflation rate provided by CCB is a reliable measure of changes in purchasing power. Its not even a reliable as a measure of consumer non-discretionary spend because it exclude most of it because “it’s too volatile”. It’s comical to me that same people feel like because cost of living has increased by x percent, then the house value is rational. Just because my orange juice is 2x in the last 5 years doesn’t mean you can justify a 34×80 lot mid-grade new build for $2.5m. or a “freehold” townhouse for 1.5 😂 reality check is this; even on a top 2% income, you are not buying a detached house in the GTA. The rate of fraud for shelter is probably close to 80%
curious about your age Jim. I am now retired but my first mortgage came with a 13 3/4 percent mortgage , that frightened me and that lasted forever , my kids own homes but that is because of the Bank of Mom and Dad , a luxury at that time but no longer plausible. I have lived through 2 “corrections” and am now waiting for the crash it won’t affect me but will be painful to watch unless you are a Canadian bank
who off loaded their residential mortgage portfolios and may lose single digit losses on that. So going to hell in a basket , I think that they too are flammable , like our economy.
I got 11 3/4 % for my first mortgage so I jumped for joy at that time and nobody today can understand why. It’s funny but my issue is we have only traded high rates for low rates to get inflated assets and building/land costs instead of reasonable ones. Different problem, but same outcome. I would say that in our time we had less shiny things to distract us to spend on, which is why when things were expensive we had the disposable income to buy them. Today my kids and many I know have cars that almost as much as the first home I bought…and the payments to go with it, and complain they can’t afford a house! I am retired, so no car dealer will ever make much money off me scrounging on the used car lot. But I also have no car payments either on 2 vehicles. I’m not cool, but old enough not to care….
Survival skills to emulate…
This was the norm for early boomers like us, very little bought new, no ‘lifestyle’…just life, holidays were local camping or what is now called ‘staycations’ no spas or gym memberships or hiring trades to do what you and your friends could do yourselves. Only debt was for a mortgage on a very modest dwelling and a payment on second hand car that ran well, and if groceries ran out, a paycheck to paycheck small holdover loan from Mom.
Then suddenly everybody could get a credit card, and the spending and debt binge was launched….along with inflationary expectations.
Also many profitable domestic businesses began and grew in this time, before globalisation took out or bought out most independents. Good if we can figure out how to support…and keep…our own high quality product producing entrepreneurs again, instead of resorting to only buying the cheapest instant junk on the planet.
Are resident young families that much worse off now? Maybe partly depends on their priorities, and whether they buy in to expectations that we all have helped drive to excess….?
Getting through to a better
The realtors are now in a forced position of shooting themselves in the foot.
As they spin a positive story, they embolden the sellers, which in turn raises their expectations of unrealistic prices resulting in higher inventory.
Sure, some buyers may fall for the hype, but the sales will quickly fizzle leading to much higher stale inventory and tumbling prices.
TICK TOCK, TICK TOCK