The word you heard when the Canadian Real Estate Association released its numbers yesterday is the steam outside our housing market.
Home sales across Canada fell 12.6% from March to April, and benchmark prices fell 0.6%, an economist described as “an extraordinary turn of events.”
“The demand for Canadian housing has broken down and who would have thought that the Bank of Canada’s interest rates had to be cut to change the mood,” said Robert Kavsic, a senior BMO economist.
The numbers were far from the record-breaking upward flight of property value seen in the autumn and winter.
The 0.6% decline in the National MLS Home Price Index in April was among the weakest prints of the last decade, Kavsik says – and the first drop since April 2020.
Prices are still up 23.8% from the previous year, “but suffice it to say that in many markets, anyone who buys a home in the first quarter of 2022 is seeing a price below the purchase price for some time,” he said.
We had data on major Canadian markets last week, but this week we got the big picture.
Markets that saw the highest price gains in the major days of the epidemic are now seeing the biggest declines, with many in southwestern Ontario.
RBC economist Robert Hogg says the MLS Home Price Index is down -4% in London, Cambridge -3.9%, Brantford, -2.6%, Niagara -1.9%, Toronto, -1.8%, Kingston, -1.8%, Barry, compared to the previous month. -1.5%, Kitchener-Waterloo, -1.1% and Hamilton, -1.1%.
BC markets, such as Chilewalk, saw declines of -1.7%, and Fraser Valley, -0.1%.
Vancouver’s price index rose 0.3% but it was the smallest increase in nearly two years, Hogg said.
In the already more affordable Atlantic Canada and the prairie, prices continue to rise. The home price index in Halifax-Dartmouth rose 5.6%, St. John’s, 3.2%, Fredericton, 2.7% and Monkton, 2.4% over the previous month. Prices also rose moderately in Edmonton, 1.4%, Regina, 1.2%, Calgary, 0.8%, Saskatoon, 0.6%. And Winnipeg, 0.4%.
Hogg said most of Quebec has made moderate gains.
The Bank of Canada’s rate hiking cycle has proven to be a game changer – “which has turned into a tough headwind for the market” and RBC economists believe April was at the top of the market.
“We think the sharp decline in activity in April marks a turning point for the Canadian market and further cooling along the way,” Hogg wrote.
But economists see it as a welcome correction after two years of volatile frenzy.
“We expect that the rising price correction seen in parts of Ontario and British Columbia will deepen and spread to other markets as market sentiment deteriorates but it is less likely to be a dissolution. Positive population factors will provide a safety net against a hard landing, ”Hogue said.
There are already signs that some markets are returning to balance. Toronto, Hamilton, Niagara Territories, Kitchener-Waterloo and Windsor, RBC notes that sales-to-new inventory ratios reached balanced-market areas in April.