Canadian Real Estate Prices Make Record Drop, No Quick Recovery: NBF

One of Canada’s biggest banks isn’t sold on a quick recovery for real estate prices. The Teranet-National Bank of Canada HPI (TNB HPI) just reported home prices made the largest annual drop on record in March. The economist that prepared the report warns home sales are still too weak to call for a recovery in the market. They also don’t see sales picking up much for the rest of the year, adding further doubt of a quick turnaround.

Canadian Real Estate Prices Fell In Most Major Markets

Canadian real estate prices increased in the raw data, but the bank chalks it up to seasonality. The national HPI, composed of the 11 largest markets, increased 0.5% in March, marking the first increase in the past 10 months. Adjusting for seasonality, prices fell 0.8% over the same period, said Daren King, the economist at National Bank that prepared the report.   

The TNB HPI generated a very different result from what you may have seen from CREA. The difference is due to how and when the two organizations measure their data. CREA uses MLS list closing data, so it’s much faster to get a response. The trade off is it’s missing all non-MLS sales and includes sales that don’t necessarily close. 

The TNB HPI uses land registry data, which makes sense, since it’s co-created by Teranet. This results in a much more comprehensive data set, which you may have noticed tends to be less volatile. It takes about 60-90 days normally for a property to go from closed to registering the transfer, meaning this data is a little older. The trade off is that no deals that “fell through” are included, leading to higher precision. 

Both are great and generally tell a similar story, but there are times when it conflicts. This is one of those times, where the market is more volatile than usual and financing hurdles are bigger than before. 

Canadian Real Estate Prices Made The Fastest Drop On Record

Canadian home prices made the fastest decline in the history of the index. Compared to the same month last year, prices are 6.9% down in March. It’s just a little bigger than the drop observed during the 2008-2009 Financial Crisis. The data only goes back to 1999, so the bank’s statement may sound a little worse than it is. We have yet to see a 90s-style pullback when it comes to home prices.  

Canadian Real Estate Sales To Remain Slow, No Short-Term Bounce

A rising CREA benchmark price has dominated headlines, but weak sales question its validity. Low inventory markets tend to result in more abrupt price movements, not necessarily in line with the general market’s acceptance of that price. Consequently, National Bank isn’t sold on the bear market being over. 

“Despite signs of stabilization, the level of sales in Canada remains very low on a historical basis and has declined by 39.5% since the start of the monetary tightening,” said King. 

Cheaper fixed term rates have appeared, but financial markets don’t see easy money soon. 

“As we expect the Bank of Canada to keep its policy rate at its current restrictive level for most of 2023, the outlook for a recovery in the housing market remains limited. As a result, sales are expected to remain below their historical average in the coming months and it is still too early to interpret recent increases in sales as a rebound in the housing market.” 

14 Comments

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  • Sarah 1 year ago

    While I recognize Better Dwelling is centered on Eastern Canada, I think it may be interesting to view the lastest news reports out of BC which is bucking the trend. Homes are selling above asking and prices are increasing. That is according to a Global BC report this week. Maybe BC is leading the charge? Hard to fathom for anyone living in Ontario, I know.

    • Trader Jim 1 year ago

      The index they’re discussing shows most of BC prices are down when seasonally adjusted, and Vancouver only up a minor amount.

      https://housepriceindex.ca/2023/04/march2023/

      btw Better Dwelling is a Vancouver-based company. When I started reading it, there was no Ontario coverage and they were interviewing people like Eby before he became premiere.

      Daniel lives in Vancouver. I believe Steven and Will are the only ones in Ontario.

  • Lost in wonder 1 year ago

    I would like to believe this bank is right. The media is full of RE hype again, generating FOMO. Who can afford the current insane prices in Ontario? GTA is nuts, but rural Ontario is totally nuts. There is basically no place to go for low – medium income Ontarians. Rents are through the roof, unless you have managed to hold onto a unit for a decade have thus locked-in a lower price. Once beautiful middle-class apartment buildings in the GTA now look like refugee camps as they cater to immigration agencies and Ontario welfare, thus pushing out the middle class that refuses to be dragged down, or creating enclaves within the buildings of “older” tenants sticking it out together while be surrounded by new tenants, often two families of 4=8 in one-two bedrooms. This is your GTA now – overstuffed rental units making life horrific and unpleasant with slumlords uninterested to help. How do we get ourselves out of this situation? We can only hope for a housing crash to rebalance and redistribute wealth.

    • John B 1 year ago

      I know this may sound crazy but has anyone considered pausing immigration while we sort our own country out?

  • Ray 1 year ago

    What happened just last week prices were increasing. The government can’t keep track of its lies any longer. Truth of the matter is that many are defaulting or extending their mortgages to 40 years. A lot aren’t even covering the interest payments on their mortgages.

    • jonjones 1 year ago

      I’m just thankful that I’m not in this boat.

  • Salamander 1 year ago

    How does one escape from this hellhole named Canada? This place isn’t for families it’s for realtors and federal employees

    • Timmie O'Toole 1 year ago

      Lots of nice places to move to that are willing to take Canadians, just gotta do the legwork. The irony is the only people that ever move to a new country are the skilled labour that doesn’t need to, they’re just tired of getting screwed.

  • Richard Zywotkiewicz 1 year ago

    As a real estate agent in Calgary I have watched the market like a hawk. My buyer clients have continuously lost out in multiple bids and prices are soaring in Calgary. Why does The writer of this article assume that Toronto and Vancouver represent the rest of Canada.

  • M.Bury 1 year ago

    Real estate is “ripping higher” and making record drops at the same time?

    • Michael Burry 1 year ago

      The 2022 decline was the largest single year % decline in history. It was ~ -20% national avg’d. USA 03-06 RE bubble’s biggest single year decline was something like -12%.

      Now is prognostication on what 2023 brings.

      In 2023, we’re 50% thru the spring market, yet the # of listings and sales both remain low. In this environment it’s easy for prices to make sizeable moves up or down. There will be examples to support both bull or bear bias.

  • Derek Wong 1 year ago

    The price rise will be consistent up this time as buyers always look at expectations not the past

  • Bruce McWilliam 1 year ago

    DOMINOS ARE FALLING FAST
    CANADIAN HOUSING IS COOKED FOR 20 YEARS
    BUY 20-50 HOUSES FOR A MILLION IN USA. CAMP IN THE BASEMENT OF YOUR MOMS HOUSE IN CANADA

  • Brian Ferrier 1 year ago

    It’s always darkest just before it goes completely black…….. data doesn’t lie

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