The Most Splendid Housing Bubbles in Canada: Prices Drop to where They’d Been 2 Years Ago,

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From peak in March 2022, prices fell 15.6%, in Toronto 17.2%. But Calgary reached a new high (still waiting for the memo?).

By Wolf Richter for WOLF STREET.

Home prices in Canada dropped 1.6% in October from September, the fourth month in a row of month-to-month declines, according to the Home Price Benchmark Index for single family houses by the Canadian Real Estate Association (CREA) today.

At $802,200, the benchmark house price is below where it had been two years ago, in October 2021 (all prices in Canadian dollars).

The index is down by 15.6%, or by $148,400, from the frenzied FOMO-inspired peak in March 2022. But not all markets are getting hit equally: Some haven’t gotten the memo yet and carved out new highs, while others have gotten hit a lot harder than the national average. And we’ll get to them in a moment.

Home sales swooned by 5.6% seasonally adjusted in October from September, the third month in a row of declines. “The sizable decline was the result of fewer sales in most of Canada’s largest markets,” CREA said. “We’re only in November, but it appears many would-be home buyers have already gone into hibernation.”

And with sales dropping faster than new listings, supply rose to 4.1 months, up from 3.1 months in May. So home sales being low isn’t a problem of there not being any supply, or whatever, but of prices being far too high for these kinds of mortgage rates, and with potential home-sellers clinging to these prices.

The effects of the rate hikes are now on display. The Bank of Canada hiked its overnight rate to 5.0% in July and has kept them there. It has been talking about the excesses in the housing market for two years, and it faces the worst rent inflation since 1983. Canadian mortgages are largely tied to shorter-term interest rates, causing the housing market to react faster to changing policy rates than the US market, where the 30-year fixed-rate mortgage is standard.

Greater Toronto Area (GTA): The MLS Home Price Benchmark Index for single-family houses fell by 2.1% in October from September, to $1.318 million, the fourth month in a row of declines after the FOMO mini-spike in the spring. The October drop whittled down the year-over-year gain to 2.8%.

From the peak in February 2022, the index has plunged by 17.2% or by $273,200.

These kinds of central-bank engineered easy-money spikes and the subsequent unwinding would be funny, if it didn’t have serious implications.

In the Hamilton-Burlington metro (part of the “Greater Toronto and Hamilton Area”), the single-family benchmark price fell by 2.9% in October from September, to $891,200. This whittled down the year-over-year gain to nearly nothing.

From peak in February 2022: -23.1%, or -$267,700
Year-over-year: +0.1%.

Another tragic-comic chart of easy-money policies gone awry.

Greater Vancouver: The benchmark price for single-family houses fell 0.9% in for the month, to $2.0 million:

From peak in April 2022: -4.8% or -$101,200
Year-over-year: +5.6%

Victoria: The single-family benchmark price fell 0.6% for the month to $1.162 million:

From peak in April 2022: -10.2% or -$132,300
Year-over-year: +2.6%

Ottawa: The benchmark price of single-family houses fell by 0.8% for the month, to $721,600:

From peak in March 2022: -12.3% or -$101,600
Year-over-year: +2.2%.

This is a funny-looking head-and-shoulders chart. I mean funny because until the pandemic, Ottawa’s housing market had been relatively sane, compared to some of the over-the-top Canadian markets.

Calgary: The single-family benchmark price rose 0.3% to a new record of $636,100, and was up by 10.9% year-over-year. People haven’t gotten the memo yet?