Canadian Real Estate Prices Slip Once Again, Worst October For Sales Since 2010

Canadian real estate found its footing last month, according to the industry. However, Canadian Real Estate Association (CREA) data tells a completely different story in the October numbers. Yes, seasonally adjusted home sales were higher than the month before, but it was still the worst October since the Global Financial Crisis. Home prices also saw another 5-digit decline, with annual growth turning negative for the first time since 2019, as higher interest rates continue to pummel budgets. But that slight uptick, right? 

Canadian Real Estate Prices Made Another 5-Digit Drop

Canadian real estate prices are still falling, though not as fast as they have been over the past few months. The benchmark price of a home reached $735,400 in October, down 1.4% (-$10,600), with prices now 0.8% (-$6,000) lower than last year. The monthly decline, although huge, was still smaller than the previous month. However, annual price growth made the first negative print since 2019. 

Canadian Real Estate Prices

The price of a typical home across Canada, in Canadian dollars. 

Source: CREA; Better Dwelling.

Canadian Home Prices Rolled Back Over A Year Of Gains

The price of a typical home across Canada has now rolled back over a year. A benchmark home was last around this level in September 2021. Prices have fallen 15.3% (-$132,900) since the record high in March 2022. The volume didn’t exactly buck the trend either, even if that’s what you heard. 

Canadian Real Estate Price Growth

The 12-month change in Canada’s benchmark home price.

Source: CREA; Better Dwelling.

Canada Saw The Weakest October For Home Sales Since 2010

Home sales didn’t exactly reinforce a changing of the tide. There were 33,698 actual home sales in October, down 36% from last year. Media blasted an industry note on seasonally adjusted monthly growth, but didn’t quite pull the data to see what this looked like in the greater context. Seasonally adjusted, it was the weakest October sales volume since 2010, during the Global Financial Crisis. Looking at the chart isn’t quite as inspiring as the words describing seasonally adjusted growth either. 

Canadian Residential Real Estate Sales

Seasonally adjusted monthly existing home sales across Canada through the MLS.

Source: CREA; Better Dwelling.

Canada’s Oldest Bank Warns More Pain To Come

The banking industry wasn’t sold on the slight firming of home prices either. “That said, the direction for prices is still lower,” said BMO senior economist Robert Kavcic. He noted that prices have dropped for 8 consecutive months, and mortgage rates are now pushing above 5%, as the Bank of Canada (BoC) tightens further.  

Adding, “… this downward price discovery is probably going to persist well into next year.” 

Buyers are facing the same home prices as last year, with much higher interest rates. Despite prices being at similar levels in September 2021 and October 2022, leverage would have been dramatically reduced. The ability to carry debt would have fallen about 31% using calculations based on a discounted 5-year fixed rate.  

Mortgage pre-approvals may have been a significant driver last month, as well. A buyer in October could have secured a mortgage rate around 1 point lower, when they sought pre-approval up to 3-months prior. This means some borrowers either faced buying immediately, or letting their pre-approval expire and securing a rate 1 point higher. Banks have previously pointed out this would be a factor in the trailing months after rate hikes, as people contemplate if more interest or higher prices are more likely. 

Canada’s real estate market is a little more complex than usual these days. While there are some signs of the market firming, there are still significant headwinds, with the country’s oldest bank still calling lower prices. It’s tempting to rush into a small bump in positive news, but it might be a stronger decision to wait for confirmation that shows things are actually changing.