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Exploring Canada’s Most Splendid Housing Bubbles: Price Drops, Slowing Sales, Rising Supply, and Bank of Canada Tightening

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The Home Price Benchmark Index is down 13% from peak in March 2022

The Canadian housing market is in a category of its own, in terms of craziness

By Wolf Richter for WOLF STREET

The Canada Home Price Benchmark Index for single family houses fell by 1.1% in August from July, after having already fallen by 0.5% in July, to $825,700 (all prices in Canadian dollars), ending a rambunctious spring selling season that had been further fueled by Bank of Canada rate-cut hopes, which then turned into two additional rate hikes so far. From the peak in March 2022, the benchmark price has dropped by 13.1%, or by $124,900, according to data from the Canadian Real Estate Association (CREA) today. Year-over-year, given the stunning price plunge last year that forms the base for this year, the benchmark price ticked up 1.0%. But not all markets are the same. In the Greater Toronto Area, prices dropped more sharply, and were down 14% from the peak in February 2022, while prices in Calgary rose to a new record. More in a moment.

Sales dropped, supply rose

  • Home sales fell 4.1% in August from July.
  • New listings rose 0.8%.
  • Since March, new listings have surged by 25%.
  • Active listings increased by 1.9% in August, the third month in a row of increases.
  • Supply rose to 3.4 months, double the level of the pandemic low.

Greater Toronto Area (GTA)

The MLS Home Price Benchmark Index for single-family houses fell by 1.7% in August, after having fallen by 0.8% in July from June, to $1.365 million. From peak in February 2022, the index is down 14.2% or -$225,800. Given the massive plunges last year in the June-August time frame, which form the base for the year-over-year comparison, and the effects of the rambunctious spring selling season, the benchmark price was up 4.1% compared to August last year.

In the Hamilton-Burlington metro, which is part of the “Greater Toronto and Hamilton Area” (GTHA), the single-family benchmark price fell by 1.6% in August from July, to $930,300, after having been essentially flat in the prior four months. From peak in February 2022, the price has dropped by 19.8%, or by $228,900. Given the stunning plunge last year at this time that had followed the stunning spike, the price in August was up 1.3% year-over-year.

These kinds of free-money-spike-and-plunge charts would be hilarious, like something you’d see in a satirical magazine, if they weren’t so serious.

The Bank of Canada has tightened policy

The Bank of Canada has tightened policy with a rate hike in June and another in July, to 5.0%, after announcing in January that it would “pause” its rate hikes at 4.5%, which had ushered in dreams of rate cuts, the result of which was a drop in short-term interest rates, with the 1-year Treasury yield dropping 75 basis points, from 4.75% in January to 4.0% in mid-March, the result of which was the rambunctious spring selling season. At its September meeting, amid re-accelerating inflation, the BoC paused its rate hikes at 5.0% with a bias to tighten further. QT would continue, the BoC also said. It has already shed 55% of its $455 billion in QE assets that it had added during the pandemic, including 46% of its Government of Canada (GoC) bonds and all of its repos and short-term Treasury bills. There is still aways to go to get rid of the crazy liquidity thrown at the markets during the pandemic, but the BoC has made quite a bit of progress so far.

Canada’s housing market reacts to shorter-term interest rates, in addition to other factors, such as hype and hoopla. It’s shorter-term rates that move the Canadian market because of the types of mortgages used. Lending typically is via variable-rate mortgages, whose rates are changed based on shorter-term interest rates; or via fixed-rate mortgages with rates that are fixed only for short periods, such as five years (for details, see our Introduction to Canadian Mortgages and Mortgage Insurance). Today, the 1-year yield is at 5.22%, and it has been in this range since early July, up from 4.0% in mid-March; it’s that sudden drop to 4.0% in March that triggered the spring frenzy.

Greater Vancouver

The MLS Home Price Benchmark Price for single-family houses inched up by 0.3% in August, to $2.02 million:

  • From peak in April 2022: -3.9% or -$81,600
  • Year-over-year: +3.2%


The single-family benchmark price was unchanged in August, at $1.178 million:

  • From peak in April 2022: -9.0% or -$116,000
  • Year-over-year: -0.8%


The benchmark price of single-family houses edged down just a hair in August, after dipping 0.1% in July, to $736,900:

  • From peak in March 2022: -10.5% or -$86,300
  • Year-over-year: +0.6%


The single-family benchmark price rose 0.7% for the month, and by 8.7% year-over-year, to a new record of $634,000:


The single-family benchmark price dipped by 0.2% for the month to $610,800:

  • From peak in May 2022: -5.7% or -$36,800
  • Year-over-year: +0.8%


The single-family benchmark price inched up by 0.2%, to $544,600, having been essentially flat for four months:

  • From peak in April 2022: -6.0% or -$34,900
  • Year-over-year: +9.6%

Quebec City Area

The single-family benchmark price rose 0.8% to eke out a record of $389,300, and was up by 8.3% year-over-year:

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