Canadian Real Estate Prices Are Falling Faster Than They Did In The Financial Crisis

Canadian real estate investors finding comfort in the fact home prices didn’t fall much during the Financial Crisis, might want to look away. Land registry giant Teranet released its House Price Index for September, and it shows a sharp drop in home prices. The index, made in partnership with National Bank of Canada (NBF) is tied for the sharpest drop in the history of the index. Economists at the bank warned home prices are falling even faster than they did during the Great Recession. 

Canadian Home Prices Fell At The Fastest Rate Ever

Canadian home prices took another sharp dive, according to the index. The seasonally adjusted composite index fell 2.0% in September, the same record-setting rate as a month before. Last month marked the fifth consecutive drop for home prices.

Canadian Home Prices Are Falling Faster Than They Did In 2008

National Bank emphasized that home prices are falling faster than they did during the Global Financial Crisis (GFC). Prices have dropped 7.0% since the May peak over the same period, and during the GFC they bottomed 9.2% lower. At the current rate of decline, a little over one more month can see prices beat the GFC decline. 

Most Markets Are Seeing Home Prices Fall

The majority of markets (8 in 11) used in the composite index saw a drop in home prices. The biggest drops were in Victoria (-5.9%), Vancouver (-3.5%), Hamilton (-2.1%), Montreal (-1.9%), and Toronto (-1.8%).  

Just three markets saw prices continue to climb, and they happen to be hot spots for young adults. Home prices in Calgary (+1.2%), Halifax (+1.1%), and Edmonton (+0.2%) continued to rise, despite tighter financing conditions. Prices were also much more reasonable in these regions, and the increases could be absorbed by a typical household. That wasn’t the case in many other cities, like Toronto and Vancouver. 

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  • J_Morrow 1 month ago

    While I will continue to cheer this dumpster fire on, let’s be honest, the 2008 GFC in Canada was not that impressive. Unlike in the US, when their sub-prime NINJA mortgage musical chairs tune stopped, our bubble kept right on blowing. Everyone knows the flavour of Double Bubble doesn’t last though, and the comic at the end is never that funny.
    Maybe it was ‘sounder banking’, maybe it was the CIBC bailout that no one knows about, or maybe it was the CMHC buying ridiculous swaths of MBS. It doesn’t really matter.
    We ain’t getting off that easy this time around. That’s for sure.

    • J 1 month ago

      Yeah, the numbers aren’t great when you piece it all together (All Google Headlines).

      IMHO – Rates are still deeply negative – BoC Hammer needs an upgrade to Sledge Level. The softlanding narrative was to let deep pocket investors time to exit Canadian assets. The common folk are there left holding the bag of debt as usual.

      Add in the Smith Manouver, Money Laundering, Foreign Cap (REITs), and Mortgage Fraud. We’re in for one hell of a ride.

      I personally will vote for whichever party that runs on financial reform next election (Except Cons – sorry, not a fan of trickle down economics).

      If not – time to be an expat. If my taxes are gonna be abused, might as well go to a place with better weather and quality of life. (Oh wait, the entire world is drowning in DEBT!? – yeah, whole world is shit, the Global Elite own most of the shit. But I’d rather be warm than freezing cold).

      Inflation ~+10% since the rock bottom pandemic stimmy + QE…
      6.8% Sept 2022 (BoC 3.25%)
      4.4% Sept 2021 (BoC 0.25%)
      0.5% Sept 2020 (Everything beyond this point = on a MAP noting “Here be Dragons”)

      ~39Million Canadians
      ~10.38 Million Families
      2.9 – The AVG. Canadian Family Size
      ~15 Million Houses in Canada
      ~66% Home Ownership Rate (~10 Million Units)
      ~32% Renters

      58% of CDN w/ HELOC w/ Outstanding HELOC Balance
      27% of Homeowners have a HELOC
      ^ HALF Homeowners are paying HELOC Principal down
      ^^ HALF of that 27% of HELOC Holders paying ONLY Interest Portion
      34% HomeOwners w/o Mort.DEBT

      367,000+ CAD AVG. Mort.LOAN Amount (ALL)
      2.32 Trillion Consumer Debt in Canada
      ^ 1.60 Trillion is tied into Mortgages
      ^^ $212.321 billion (0.2 Trillion) is HELOCs
      ^^^ Rest is Loans, LOC, Student, Car, Credit Card, etc.
      ^^^^ Each Canadian is on the hook for $57,500 in government debt: Canada Day Debt Report (Taxpayer.ca)

    • Tom Wolfe 1 month ago

      Funny! Funnier because it’s true and going to continue to be true. Gardiloo!

  • Millenial survivalist 1 month ago

    I bought a house in 2020 for 450k at 1.8% , in the middle of a f$%@& cornfield. I cant imagine nor do I want to, what it would be like for a Canadian who was led in by bull$t experts that real estate was hot and walk in now or forever miss out, only to purchase a home for over 1 mil +. With the rise of living costs and interest rates, explain to me how to avg Canadian is going to keep up? Now that the value of their home has decreased yet they still owe the orig $, and the most important thing on your Television is them telling you how the Leafs have a promising season, or how JTs new haircut is stylish.
    We live in times of Greed just as we did 2000years ago, nothing has changed.

  • dave frazer 1 month ago

    Falls will accelerate as sellers begin to understand how much they are falling and try to get out at any price. From now to January they will fall more quickly. Spring prices may stabilize for a bit. Come May if the sping market fails to move the product, the odds are that another large drop will occur and after that its who knows.

    • J_Morrow 1 month ago

      I’ll take ‘The Latter’ for $1000, Alex.

    • Yoroshiku 1 month ago

      It seems like a lot of sellers in the GTA simply took their houses off the market, assuming that this drop was just a blip, and that house prices would begin to climb steeply again in a few months time. But with mortgages getting more expensive, can everybody hang on indefinitely?

  • KMP 1 month ago

    I do feel for the people that will be caught up in this, but watching from the sidelines, I found the FOMO mania to be both fascinating and frightening. The levels we reached during the mania through the over-bidding (cheered on by the RE industry), simply defied all common sense. Beyond the simple calculation of “can I afford this payment”, there was no thought given to the insanity of the situation. Did it seem reasonable that a 1200 sq. ft. bungalow in the exurbs could be worth $1.1M or 1.2M? Of course not…not if you’re thinking straight. Where did people think the liquidity would come from to continue this march upward unabated….especially in a normalized rate environment. Will salaries double or triple in the next five or even ten years? Again…of course not. The mania quite literally caused people to lose their minds…and now the hangover starts. At the very least, maybe what we’re about to go through will break the psychology of “house as retirement”, which is ridiculous on it’s face….and encourage investment in other sectors that actually contribute to the country moving forward. We need to get off the RE drug as a country and hopefully the detox is starting now. A mania never ends well and I think we’re about to learn that lesson.

  • Millenial survivalist 1 month ago

    Long shot, what do you guys think the interest rate will be going into mid 2023 and late 2023?

  • RM 1 month ago

    For an incredibly long time, as all of us know well, various factors (institutions / people) have inflated the cost of housing in the Greater Vancouver area far beyond the financial means of the very residents who work and live here. And the same can be said for many places across Canada.

    For many of those priced out of the market, for those who have moved away from family as a result of this unrestrained and manufactured boom, and for those who have recently lost their homes and those who will inevitably lose their homes in the coming years due to rising interest rates coupled seemingly by the BoC leading many to believe the low rates were here to last only to try and weather the financial storms that rate increases are now causing – one can only assume they will be looking for answers from the very people and institutions responsible.

  • Scott 1 month ago

    and the 300k new units coming on stream this year should really help with prices…

  • Mike 1 month ago

    Further interest rate increases by the BOC will put additional pressure on the real estate market, particularly those who purchased at overpriced market prices. Higher interest rates will drive many of them out of the market, putting additional downward pressure on real estate prices.

    • Steve 1 month ago

      And when the rates don’t increase as much as what you hope for then what? Are these people who you predict will head for the exits become renters again? In the current rental market? Will the government reverse course and stop immigration?

      What if the trickle down effect you describe remains only a trickle?

      So many chicken littles out there who are going to be too scared to buy at lower prices anyway. If it drops 30% they’ll wait for 50%. If it went to to 1990’s prices they’d still be scared.

  • Edward HC Graydon 1 month ago

    Real home prices in Canada have historically grown at about 3% per year dating back to the early 1980s roughly reflecting inflation, real wage growth and gradually falling interest rates. In the current episode, even as inflation has accelerated to multi-decade highs, real home prices have surged by more than a third in the span of two years, clearly stretching beyond that long-run baseline growth trend. Historically, we have seen some dramatic deviations from trend, all of which were eventually corrected in some fashion. In one extreme example, real home prices surged 38% above trend in the late-1980s, and took 15 years to recover. By the early-2000s, however, housing was exceptionally cheap, which set the stage for the long bull market that followed. Notably, for most of the 2010s, housing was doing roughly what it should have been doing (recall the false bubble calls we were constantly arguing against), until BoC rate cuts in 2015 led to some froth in B.C. and Ontario into 2017—that quickly corrected with rate hikes. As of Q1, when we believe the market peaked, real Canadian home prices sat 38% above trend, the widest deviation in the past 40 years.

    By this measure, the most froth has accumulated in the suburbs and exurbs of Toronto. While Toronto prices have risen 41% above trend, exurbs (using markets 1-2 hours outside Toronto) have run ahead by more than 70%. Cottage country has seen a similar surge. Some regions, however, barely look frothy at all. Alberta is a good example where, after five years of declining prices leading into COVID, the market is still just catching up to its long-term baseline. Other markets, such as Vancouver, Montreal and Atlantic Canada are frothy, but not to the extent of Southern Ontario.

  • Alex 1 month ago

    Let it collapse

  • Bearish 1 month ago

    Much like Alex the housing market is dead.

  • R.u. kiddingme 1 month ago

    You’re wrong about the typical household in Calgary. According to the 2019 census More than 50% of albertans make 50k a year or less.

    Average Millennial mom and dad make 44,000/y each after taxes and represent 33% of the workforce in Canada. The average home price in alberta was around $412,000 last I checked, and around 500k in calgary…

    Please for the love of all that’s holy stop saying that a typical household here can absorb the price. The typical family here can’t even afford to buy a house in calgary.

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