Canadian real estate prices are climbing despite an eroding economic and population outlook. Canadian Real Estate Association (CREA) data shows prices climbed sharply in January. It wasn’t due to a tightening market, as the growth rate of new listings was 8x that of home sales. Rising prices were almost certainly due to exuberance and policymakers flooding the market with cheap credit, against the advice of the country’s central bank.
Canadian Real Estate Prices Made A Sharp Jump Last Month
The composite benchmark price of a home sold through the CREA MLS.
Source: CREA; Better Dwelling.
Canadian real estate prices made a substantial move last month. The composite benchmark, or typical home, climbed a whopping 0.5% (+$3,600) to $709,200 in January. It was enough to bring annual growth back into positive territory, coming in 0.1% (+$500) higher than last year. Prices have now rolled back to the highest level since September 2024, though it’s worth remembering this is roughly the same price it was back in September 2021.
Canadian Real Estate Price Growth Back In The Black?
The annual price growth rate for a benchmark home sold across Canada.
Source: CREA; Better Dwelling.
Monthly growth moving 5x the rate of annual growth emphasizes just how sharp and sudden the move was. It’s also been nearly a year since annual growth was in positive territory, with the last print back in March 2024. However, the composite remains 16.8% (-$142,800) below the record high hit in March 2022. A small data point to help temper expectations—it was a big month, but it has a long way to go.
Canadian Real Estate Inventory Growing Much Faster Than Sales
What’s behind the sudden surge in price? Other than the flood of cheap credit, not much. The MLS reported 26,650 home sales in January, an increase of 2.9% from last year. Demand was met with 65,054 new listings, up 22.7% over the same period. More buyers came to market, but there were a lot more sellers. This isn’t exactly an ideal time of year to list, either.
More sellers than buyers helped to erode the sales to new listings ratio (SNLR) further. The SNLR fell to 40.9% in January, shedding 8 points from last year and landing less than a point within the bottom range of a balanced market. A falling SNLR generally means that demand is weakening faster than supply, and when the ratio is below 40% it’s said to be a buyers’ market. Experts believe that’s the threshold where prices fall.
January isn’t known for a particularly strong demand balance, but it’s usually not this weak. Canada hasn’t seen the monthly report a lower ratio since 2019, and believe it or not—that was 6 years ago. We know it feels like it was just yesterday that policymakers were busy preparing for a health emergency by dismissing offers of PPE to focus attention on buying mortgage bonds. Tragically, that wasn’t a joke.
While it’s unexpected to see prices climb with an eroding demand balance, what’s happening isn’t a mystery. Policymakers have been throwing billions in stimulus and increasing credit service capacity over the past few months. Even the Bank of Canada (BoC) deputy governor warned that the recent decisions are a mistake and would erode affordability.
Yeah, politicians will “fix” housing. To those who waited more than a half decade and two elections only to realize they would rather cut the loonie’s value by 25% and change inflation modeling to underreport currency erosion, just so people don’t cry about “losing” money on their homes, have you learned your lesson yet?
We’re living in “interesting times”, as the proverb goes.
Housing is still over-inflated. Prices are going up and inventory is way up? The market will eventually correct, dramatically, one hopes. That’s the only way young people will ever be able to afford to buy a home in the GTA, Calgary, or Vancouver.