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.