Canadian Real Estate Prices Move Lower After Five Months of Growth

Canadian real estate prices may have just seen the end of a short-lived recovery. Canadian Real Estate Association (CREA) data shows home prices fell in July. It was a minor drop considering recent activity, but does end a five-month winning streak. Is this just a minor setback, or the correction picking up where it left off?

Canadian Existing Home Prices Fell $3,300 Last Month

Canadian real estate prices just saw the end of its post-correction winning streak. The composite benchmark, or typical, home fell 0.4% (-$3,300) to $757,300 in July. Prices are now 1.5% (-$11,800) lower than the same month last year, the smallest 12-month decline since last October. Falling monthly prices but improved annual growth? It’s not an easy read this month, so let’s break it down.

Canadian Real Estate Prices

The composite benchmark price of a home across Canada.

Source: CREA; Better Dwelling.

A Base Effect Makes Annual Growth Look Stronger Than Reality

Despite last month’s falling home prices, the annual growth rate moved higher. Although home prices in July were 1.5% lower, this appears to be better than the 4.5% decrease seen in June. How does this make sense? 

The reason for this seemingly odd move is a base effect. This is when an irregular movement in one period impacts the reading in another. The result is the perceived strength of the price movement is either over or understated.

In this case, a $3,300 drop in July sounds like winning when contrasted with the $27,200 decline 12 months ago. Both are undesirable price declines, but last month boosted the annual growth rate.

Canadian Real Estate Prices Resume Getting Further From Peak

Comparing price movement to a fixed-point like the all-time high helps with perspective. The benchmark home was 11.5% (-$98,500) lower in July, when compared to the March 2022 high. It reflects the $3,300 drop, rolling back a portion of the gains made in June. Every month since this past January helped return prices closer to the peak. Last month’s data put an end to those gains, indicating the potential for trend reversion.

Canadian Real Estate Prices Resume Fall From Peak

The percentage change in price after hitting the all-time high in March 2022.

Source: CREA; Better Dwelling.

The national benchmark reflected a diluted version of what’s occurring in major markets. Virtually all major markets reported a decline in their respective composite benchmark price. While a month isn’t a trend, it takes some serious momentum to go from big gains to big losses. Indexes tend to be laggy, softening and delaying trends. The national index, being an index of indexes, compounds those issues.

It’s also worth mentioning the MLS benchmark underwent major changes. Technically the biggest change since the creation of the MLS HPI. The industry argues this makes the index more responsive to market changes and trends. However, some experts have claimed it distorts the market, obfuscating what’s really happening. They suggest the numbers be taken with a grain of salt.



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  • Sharon Sommerville 10 months ago

    A piece on changes to the MLS benchmark and an explanation of what some experts see as potentially distorting and obfuscating data would be helpful. Thank you!

  • Duddly-Do-Right 10 months ago

    Wasn’t there an article here just yesterday claiming prices are moving lower as Canadian RE loses steam??? Could someone please explain and make sense of these conflicting articles?
    Geesh… it would help if reporting reflected what is really going on and not what suits the agenda.

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