Canadian real estate is showing signs of life… or it’s making its last death rattle. Canadian Real Estate Association (CREA) data shows single-family home prices fell in December. A handful of beaten down markets proved to be an exception though, with one rising over $50k in the month. Yes, a single month.
Canadian Real Estate Prices Are Still Falling
Let’s start with the aggregate, or national, house price index (HPI) for single-family homes. The benchmark price of a home fell to $748,800 in December, dropping 1.2% (-$9,200). Since peaking in March 2022, the national index has plummeted 18.8% (-$181,400). At this point, it’s a little shy of being a “crash.”
A crash is a technical term for asset prices falling more than 20% from its peak within a 12-month period. At this pace, just one more month like December would be enough to make that happen. Right now, 20 cities have HPIs that would meet this criteria when it comes to single-family homes.
One of Canada’s Most Expensive Markets Saw Prices Rise Almost $52k In December
Not all markets are suffering declines. Five major cities saw a big jump in the HPI in December, with Oakville-Milton making the biggest. Oakville-Milton’s benchmark hit $1,483,000 in December, up a whopping 3.6% (+$51,500) in just 31 days. The region is still down 22.4% (-$427,100) from the peak, so those buyers haven’t recovered (yet?). It’s an unusual trend reversal since prices fell so fast in the area.
Canadian Real Estate Price Change In Dollars
The dollar value change of the benchmark price of a single-family home in Canada’s major real estate markets in December 2022.
Source: CREA; Better Dwelling.
Simcoe single-family home prices made a sharp bounce higher after a year of declines. The price of a home climbed 2.3% (+$12,500) in December, but remained 18.3% (-$127,000) lower than the peak. Home prices in this region were some of the fastest growing in Canada over the past few years. A substantial correction was expected, but a bounce may have a few casting doubt it’ll happen.
The remaining markets saw more modest increases. Starting with the biggest increase, prices climbed in Kitchener Waterloo 1.3% (+$10,300), Halifax 2.8% (+$800), and Barrie 0.1% (+$1,000). Halifax is the only market that didn’t see a significant decline before printing last month’s growth.
Canadian Real Estate Markets Still Saw Big Drops
Despite the big increases, some markets saw large price declines too. In percentage points, the largest drop was Bancroft (-5.9%). It was followed by Kingston (-5.4%), and Sudbury (-5.3%). The price declines were 5-digits in dollar terms, for all three of those markets.
Canadian Real Estate Prices Are Off All Time Highs In Every Market
The benchmark price of a single-family home in Canada’s major real estate markets.
Source: CREA; Better Dwelling.
Greater Toronto’s single-family HPI showed a sharp drop, and entered “crash” territory. The benchmark price fell to $1,276,000 in December, falling 0.6% (-$7,600). Since peaking, prices have fallen 20.4% (-$327,800), but the region was very much split. On one hand, it includes Oakville and its massive jump last month. On the other, it also includes Mississauga, which saw prices fall 5.0% (-$67,100). The City of Toronto’s prices moved more in the direction of Mississauga than Oakville.
Greater Vancouver real estate prices have been sticky, but they’re finally coming down. Its single-family benchmark fell to $1,823,900 in December, down 1.9% (-$34,900). It was a steep drop, with prices now 13.1% (-$276,000) lower than the all-time high. Vancouver has reclaimed the spot of most expensive single-family market in Canada.
Just a few markets rising doesn’t make a trend, but the size of that increase is worth watching. Expectations for rates to stay at these levels have been falling fast. A rising overnight rate and pause has many thinking the price correction is over.
Typically, monetary policy takes between 18 to 24 months to trickle down to the market. That means this week’s hike shouldn’t be fully felt for up to two years. However, so much moral hazard was created, few see that timeline.
Most people expect the Bank of Canada to ease monetary policy in the coming months. In fact, the market is pricing it in, with 5-year fixed rate mortgage rates now falling. It’s probably concerning for those worried the market might reignite. It’s an even bigger problem for the Bank of Canada, that’s trying to desperately cool expectations that are now galvanized.
Dead cat bounce?
No problem let prices rise but the question is who’s qualified for mortgage to buy it. If anyone is buying, it’s money launders now. Investors won’t buy because they can’t, renting them out won’t cover the mortgage payments.
A peek/regulation into all these private lenders would probably reveal the extent of money laundering through RE.
20% down – pay interest / drive up prices and wait for a sucker to pay later.
Who is going the drive up? Most people have trouble to balance their budgets, and who is going to qualify at the current market rates? Please leave a comment on this comment. Thanks.
Yes exactly
A handful of extremely high priced properties could account for that increase. You didn’t break down how many homes sold in Oakville & for how much. That info would be worth noting.
50k is nothing for Canadian real estate. Drop in bucket. During covid houses were going up 1k per day for over a year in a row
Is everyone in Canada math impaired, because that’s not “nothing.” It’s nearly twice as fast as during COVID by your own account.
I wouldn’t count on the Canadian Real Estate Association (CREA) to give you the correct information. They’re catering to their loyal supporters, Realtors, by pumping up real estate stories even if prices are falling. Or worse, fraudulent misrepresentation (i.e. https://www.youtube.com/watch?v=ShBvRe0Jv68
2nd Toronto home was listed for sale without the homeowner’s knowledge … police sought the public’s help after the house sold without the owner’s consent. https://www.cbc.ca/news/canada/toronto/fraudulent-home-sale-1.6710868
There are Zero sales happening so a single sale can throw off the average. Love this clickbait that disguises as news!
Not true. Oakville’s dollar volume was almost a fifth of the size of Toronto’s detached market, but I’m guessing that doesn’t matter since you’re trying to pump that prices are falling.
I heard today from a broker offering to set me up with a five-year fixed mortgage at 4.28%. And I know people who think if they don’t get back into the property market now they’ll miss out.
I’m starting to think Canada has gone so long without a wipeout catastrophe in real estate, like most other places had in ’08, that people can’t conceive of it happening. So maybe house prices are just going to keep going out of control until something awful happens.
That sentiment is typical of a bubble. Nothing crashes if there’s people that are risk-aware, someone needs to step in the doo-doo.
I am reading comments and looks like people generally think it is normal cycles. Really, do people realize this while thing with blowing bubbles and constantly growing dwelling prices is abnormal? We are talking about finalization of the basic human need in dwelling , place to live making simple place to live affordably for most. And note that this process is not limited to Canada. It is world wide phenomenon. Looks like capitalism cannot solve no issue and is only capable of parasitic existence creating more and more unsolvable within this system problems.
Most of you know what this bounce is called in the stock market. This is nearly a ‘ DEAD CAT BOUNCE’ before the next downtrend starts. We should wait till spring time to declare the correction is over and the uptrend to begin.
Agreed. Seems like small sample size skewing the numbers.
A benchmark doesn’t skew with small numbers, you’re thinking of the average selling price.