Last month Canadian real estate prices continued their path to a lighter future. Canadian Real Estate Association (CREA) data shows the price of a composite benchmark (typical) home fell in July. It marked half a year of slowing annual growth, as rate cuts fail to rejuvenate demand for homes at current prices. Home prices have also set lower and lower peaks, often a bearish sign indicating fewer buyers are willing to pay previously lofty levels.
Canadian Real Estate Prices Are Printing Lower Annual Peaks
The price of a typical home across Canada.
Source: CREA; Better Dwelling.
Canadian real estate prices slipped lower last month. The price of a benchmark, or typical, home fell 0.8% (-$5,800) to $724,800 in July. It’s now 3.9% (-$29,100) lower than the same month last year. Not exactly in a downward spiral, with prices at a similar level to three years ago. It may appear boring, but the seasonal peaks are beginning to form an interesting sign.
Typically prices peaking at lower and lower highs is a sign of exhausted demand. Fewer qualified buyers are jumping into the market as prices approach the previously failed peak. For the benchmark, this is the third peak—an all-time high, with the two following peaks getting lower each time. This often indicates the pool of buyers who believe prices should be higher, is shrinking, typically marking the end of a period of exuberance.
Canadian Real Estate Returns To Negative Growth
The 12-month change in the benchmark price of a home across Canada.
Source: CREA; Better Dwelling.
Home prices are in a downward trend, with few reasons to see anything change in the next few reports. Annual growth has slowed for six consecutive months, with July coming in at the lowest rate since June 2023. Not all that long ago, but a return to negative growth with soft demand is a less-than-ideal setup.
The price of a home might be similar to 3-years ago, but prices have significantly declined since the all-time high. Last month’s benchmark was 14.9% (-$127,200) lower than the March 2022 record high. A pullback of this size is in correction territory, but not quite a crash. A few more months at this rate might be enough to push it into that region.
Canadian real estate prices continued to move lower last month, as widely expected. While prices have come down significantly, the surge they made still placed a typical home out of reach for most households. That might not change in the near term.
BMO recently warned that weak real estate demand will persist until rates fall much further. If demand remains weak, it will likely continue to apply downward pressure for the time being.
Dropping prices, mean fewer buyers, interest rate changes will have little effect. Buyers are now waiting for the bottom could be 6 months away could be 6 years from now.
As prices drop sellers will begin to panic and the drop could be rapid and considerable, back to 3 times earnings which was normal in the past instead of 10 times earnings. Sounds impossible, who knows. As for condos dropping prices increasing , fees and high repair assessments on older building may make them impossible to sell and totally worthless. Once large assessments on a few older condos start to show up. The market for older condos of any type may well dissapear.
The special assessment stories are getting out of hand. The bigger unit owners do this because maintenance is based on square footage, but special assessments are per-unit allocations.
Toronto condo, $40k to replace windows.
https://toronto.ctvnews.ca/mobile/toronto-condo-owner-facing-40-000-bill-for-new-windows-1.6998186
Toronto $30k to $40k per unit with 15 days to pay
https://www.cbc.ca/news/canada/toronto/condominum-toronto-owners-repairs-1.6323195
Ottawa $11k and one month for a leak.
https://www.cbc.ca/news/canada/ottawa/sudden-600k-assessment-stuns-1.7232581
Remember value and what people pay are completely different.
Is it a bad idea to pay this much if you have to stretch your budget? Maybe.
Your friends might be paying it though, and then you’re in a worse place if you ignore it.
It’s no go the picture palace, it’s no go the stadium,
It’s no go the country cot with a pot of pink geraniums,
“It’s no go the Government grants, it’s no go the elections,
Sit on your arse for fifty years and hang your hat on a pension.
It’s no go my honey love, it’s no go my poppet;
Work your hands from day to day, the winds will blow the profit.”
Louis MacNeice
Bafpipe Music
(1938)
BOC reduces rates twice. The US Fed does not, why? Most American mortgages are rate locked for 30 years, not so in Canada. Now with lots of fixed term mortgages coming due, CDIC, BOC and the Federal government is looking at lots of CDIC insured mortgages defaulting. They are worried stiff to put it mildly.
This doesn’t include all the real estate not being sold at all. Condos will probably be a real disaster. Taxes maintenance fees mortgages interior renovations etc Toronto isn’t Saudi Arabia No oil fields spewing out billions of dollars everyday Mostly low paying jobs with no future
By my count, 4 Toronto condo sales today were at a loss to the sellers, each with sale prices all at 2019 prices.
Trying not to revel in the pain of others, but also sick at the state of housing in this country and ready for the real estate market to burn so we have a chance to build some kind of real economy.
Rates need to be lowered to support housing
Rates need to be raised to support renters and Savers.
Canadians need an economy with real jobs.
A housing market kept from collapsing thru Government Intervention creates a select group of Rentier Welfare Bums.
It is over. Housing markets are in serious decline across Canada and investors have exited to go to the USA. Thanks for helping Canadian bank stocks go through the roof with your overspending. Only stooges overpay for condos and houses in Canada. New USA houses are 400K or less. See youtube, zillow and redfin.