Canadian real estate has entered a deep freeze ahead of the declining winter market. CREA data shows a benchmark, or typical home, saw prices fall in November. Weak sales combined with healthier inventory has brought prices significantly lower. A typical home across Canada has now dropped over $140k in just a few short months.
Canadian Real Estate Prices Fell Another $9k Last Month
Canadian real estate prices continue to spiral lower, falling almost as fast as they rose. The benchmark price of a home reached $726,000 in November, down 1.3% (-$9,400) from the previous month. Prices are 4.4% (-$33,100) lower than the same month last year, with negative annual growth now firmly established.
Canadian Real Estate Prices
The price of a typical home across Canada, in Canadian dollars.
Source: CREA; Better Dwelling.
Canadian Home Prices Dropped $142k Since Peak
Just looking at annual growth fails to convey how much the market has changed. Negative annual growth is rare, but we just saw a bigger contraction by this measure in 2019. If that’s your only context, you might think of it as a nothing burger—since no one remembers prices in 2019.
Canadian Real Estate Price Growth
The 12-month change in Canada’s benchmark home price.
Source: CREA; Better Dwelling
However, the benchmark price has tumbled a whopping 16.4% (-$142,300) since the March 2022 peak. Remember how price growth was booming at the end of last year, and in early 2022? All of those gains have been wiped out as prices roll back to the same level they were 15 months ago.
Canadian Existing-Homes Sales Just Had One of The Worst Novembers Ever
Canadian existing home sales have taken a dive, helping to explain the price drops. Seasonally adjusted sales fell to just 33,834 homes in November, down 3.3% from a month before. Unadjusted sales are down 38.9% compared to last year. CREA notes it was one of the worst Novembers on record for home sales.
Canadian Residential Real Estate Sales
Seasonally adjusted monthly existing home sales across Canada through the MLS.
Source: CREA; Better Dwelling.
The Number of Homes Listed For Sales Fell Slightly
Talk of interest rate cuts next year has delayed many sellers, and it shows in the inventory. Seasonally adjusted new listings fell to 67,849 units in November, down 1.3% on the month. Unadjusted new listings are 6.1% lower than last year, meaning fewer sellers are listing. Worth mentioning a whack of pre-construction completions are expected to hit next year. Since those were largely bought by investors, many are likely to end up on the market.
Canadian Real Estate Demand Is Weakening Faster Than Supply
New inventory might have taken a dive, but it’s not falling nearly as fast as sales. The seasonally adjusted sales to new listings ratio (SNLR) fell to 49.9% in November, down 1.0 point from a month before. Unadjusted SNLR shed 17.3 points from last year, indicating a balanced market. In a balanced market, inventory is sufficient for the demand and priced correctly. However, the lower this ratio goes, the more likely a large price correction is to occur.
It’s important to note the SNLR tends to tighten around December to March. It turns out sellers are less than enthusiastic when it comes to selling in a Canadian winter. It makes more sense to people outside of BC.
Canadian real estate is taking a breather after the overstimulated boom. The drop in demand and rising financing costs are likely to continue eroding at prices near-term. As mentioned earlier, many sellers are holding out in hopes of a rate cut next year. This can reduce inventory, and tighten the market as they gamble a price reversal. However, BMO recently warned we’re unlikely to see an interest rate cut in 2023 due to a lack of room. The cut would be counterproductive to central bank action to cool inflation.
Still stupid overpriced, but nice to see it coming down. Political elite must have sold their rental properties.
Still double the price of buying in the US and you can actually find healthcare there, as opposed to the free healthcare that’s unavailable unless you’re on your deathbed.
well you will be offered MAID – especially if you are a veteran – it is so very dysfunctional – we all need to speak up loud and clear – this mess is unacceptable
Well, I think house prices won’t be coming down for long, although they really need to drop by at least 50% for any kind of normal affordability to happen here.
Canada is now so incredibly dependent on real estate as our only growth industry that much larger price drops will cause a near-existential threat to all levels of govt and to banks & the CMHC, and therefore won’t be tolerated. I think the BoC is close to their terminal rate, although real rates are still deeply negative. The intense pressure will soon be on the BoC to not only stop raising, but actually start cutting rates again in just a few months. So, those potential sellers holding out for lower rates to list will probably be right :-(.
There’s what the BoC SHOULD do, which is aggressively target inflation until it’s firmly back to near-zero and then NEVER drop interest rates below inflation again, and there’s what they WILL do, which is fold and go back to ZIRP again, permanently — inflation and the CAD be damned.
I have no confidence whatsoever in either the BoC or the Trudeau government to resist the painful wailing of the overindebted homeowers, politicians, real estate industry insiders, and all of their lobbyists losing their shirts, and actually stand firm on interest rates until inflation is under control.
Also, with this dangerously-overindebted country, it won’t take much longer of these almost-normal interest rates to cause large impacts or a financial crisis, so inflation will likely come down quite quickly in 2023, or at least get going enough in the right direction that the interest rates will be quickly slammed back to 0%.
I’ve now given up on ever owning a home in Canada again – I cannot possibly compete against the incredible corruption at all levels of government, the money launderers, the speculators, and the FOMO crowd all pushing hard to get real estate prices back up to some of the highest levels in the world. Fortunately with no debt, we can manage the high inflation, but many others cannot, and they unfortunately will bear the burden of permanently high inflation here just to support house prices.
I plan to leave Canada in the next few years to go somewhere with a more reasonable cost of living, and I can’t understand how the Trudeau idiots can keep scamming immigrants to come here and sell their souls to support our real estate market. Hopefully they’ll start to see through it and realize that there’s no benefit to come here with some of the highest cost of living in the world, when there’s so many better countries to immigrate to.
Falling rates bring sales forward to create excess demand to drive prices higher. It shouldn’t be a surprise that neutral interest rates led to fewer sales since those people bought earlier at an inflated price.
This is markets 101, but in a bubble no one wants to discuss rational market movements, they’re all just precursors for why it goes up or why going up is around the corner.
In before someone says “there’s no such thing as falling demand, everyone wants a house in Canada” without realizing demand isn’t if you want something, it’s if you’re actually going to buy it. Millions of people want a Rolls Royce but can’t afford them. It doesn’t mean they just need to be build to sell them.
The borrowing and spending binge by Canadian households, businesses, and governments (all levels) continues unabated.
At the end of September, 2022 the total debt outstanding in Canada (bottom line of the Statistics Canada credit market summary data table) was $10.904 trillion. At the end of September, 2021 the total debt outstanding was $9.902 trillion. In the 1 year period from the end of September, 2021 to the end of September, 2022 it increased by $1.002 trillion. This is an increase of 10.1%.
Canadian total (household, business, and all levels of government) debt numbers as of the end of September, 2022
https://owecanada.blogspot.com/2022/12/canadian-total-household-business-and.html
Big falls will come in May -June when all the spring listings do not sell. There is almost no buyers out there as they cannot afford a mortgage . Cash buyers,they are all sitting on the sidelines waiting to see how far prices will drop.
My two cents…
The values will fall but they will rise once again when the supposed 1.5 million New to Canada immigrants come pouring over the border in the next 24 – 36 months. First thing a new immigrant needs is a roof over their head.
Putting aside the global market cooldown, in combination with unaffordable cost of funds to finance Canadian real estate, the surefire way to cool the housing market and bring real estate values in line with affordability is to reduce demand…period. How is that done…? By clawing back immigration for the next two -three years and match it to new-build housing starts…its not rocket science…just common sense.
Canada builds between 190K to 250K new homes per year on average, and this number will be in decline over the next 12 to 24 months due to “cost to build” vs “reduced profit” as home values decrease. Builders will not build if they cannot make a profit. Municipalities will not shoulder the cost of infrastructure (water/sewers/roads/utilities) to new developments if Development Fees are reduced or waived, as is the case with Doug Ford’s “Build Ontario” plan.
And the feds are heavily reliant on the immigrant vote and without this, they stand a high chance of losing their grip on power. They really painted themselves into a corner with all this crazy money printing, and shit is about to get really bad for alot of people.
Good luck, Peace and Health to all out there… Merry Christmas and a Happy New Year!
well you will be offered MAID – especially if you are a veteran – it is so very dysfunctional – we all need to speak up loud and clear – this mess is unacceptable
Don’t worry Trudope and Sean Fraser will bring in a whooping 500,000 migrants every year to keep this real estate bubble going.
Those politicians I just mentioned should be in prison for crimes against the country.