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The housing market in Canada might be approaching the end of a cyclical decline. There was even a very small monthly gain in home resales nationally in October, Signaling a noticeable change from the sharp reduction in activity that occurred over the spring and summer. The rate of decline is gradually reducing. Although it is certainly evident that property prices are down at this point, last month’s decline was the lowest since May. While we still anticipate a period of consolidation before prices finally begin to rise again, this information suggests that the bulk of the price adjustment in Canada has concluded. According to our analysis, prices will bottom out around spring and market activity will be quiet through early 2023 as a result of rising interest rates and the lack of affordability.
In October across Canada, home resales increased just by 1.3% monthly to 424,600 units. This may indicate that the market’s activity, which has fallen to 36% in the last seven months, is about to bottom out. As per CREA report in October 2022, the average price of resale residential properties sold throughout the province was $835,090, a decrease of 8.5% from October 2021.
Home price declines are still ongoing. In October (down 1.2% from September), the overall MLS Home Price Index for Canada declined for the eighth consecutive month. For the first time in three years, it fell below its year-ago level (-0.8%), and it is currently down 10% from its peak in February. In October 2022, the total dollar value of all home sales in the province was $10.4 billion, a significant drop of 47.6% from the same month in 2021.
CREA touts a separate figure, known as the House Price Index, as being a better indicator of the overall market because it claims that the average selling price can be misleading because it is readily distorted by sales in pricey, large cities like Toronto and Vancouver.
In October, the HPI came in at $756,200. This is a fall of 1.2% for the month, the weakest since June, according to CREA. However, it is also down 8.2% from where it was six months ago. Higher interest rates imply that homes are still two to three times more expensive to finance now than they were earlier in the year, even though prices have fallen from their peaks.
Even while the real estate market downturn may be nearing its end, it doesn’t mean things are about to get better. High and steadily rising interest rates are likely to continue making buyers wait for some more time. Even if activities stabilize at current levels, the prices of the houses are not going to increase drastically. We anticipate that benchmark prices will continue to decline through spring.
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