Canada’s housing market slowed for the fifth straight month in July, with the volume of home sales down significantly and the typical home price down 6 per cent from the peak in February, marking the largest decline since the 2008-09 financial crisis.
The national home price index fell 1.7 per cent to $789,600 from June to July on a seasonally adjusted basis, according to the Canadian Real Estate Association (CREA). It follows a record monthly decline of 1.9 per cent from May to June. From April to May, the index dropped 0.8 per cent and from March to April, it fell 0.6 per cent. From February to March, it decreased by 0.18 per cent.
The suburbs and less populated cities in Ontario and British Columbia have lost the most value since the peak of the market. They were all areas that had seen prices soar during the first two years of the COVID-19 pandemic, when residents took advantage of record low interest rates and fled cities in search of more space.
In Ontario’s Oakville-Milton region, a wealthy area west of Toronto, the home price index was down 17 per cent on a seasonally adjusted basis from February to July. The typical home price lost $266,000 over that period. In Mississauga, a large urban centre that borders Toronto, the home price index fell 13 per cent. In Brantford and Barrie, the typical home price was down 14 per cent and 9 per cent, respectively.
In B.C.’s Chilliwack region and the Fraser Valley, the index was down 9 per cent and 8 per cent, respectively.
From peak prices in February, the national home price index is down 6 per cent. That marks the largest five-month decline since the financial crisis. And it does not fully reflect the impact of the Bank of Canada’s latest interest rate hike in mid-July, when the central bank increased its benchmark rate by one full percentage point to 2.5 per cent.
“Onward and downward for now,” said Robert Kavcic, senior economist with Bank of Montreal, in a note to clients, adding that July resale numbers do not “fully reflect” the latest interest rate move.
Mr. Kavcic and other private-sector economists expect home prices to drop further, as borrowing is set to become more expensive with the Bank of Canada’s plan to continue hiking interest rates to combat soaring inflation.
He forecasts the national home price index will drop as much as 20 per cent from February’s peak through next year.
Nationally, the volume of sales fell 5.3 per cent from June to July, with activity down in about three-quarters of the country. In the previous month, resales had fallen 5.6 per cent.
The regions that continue to see large drops in activity are Toronto and Vancouver – Canada’s two most expensive markets – as well as the Fraser Valley, Calgary and Edmonton.
At the same time, the number of new listings fell by 5.3 per cent – a sign CREA said suggests home sellers are waiting on the sidelines.
Compared with July last year, the home price index is up 10.9 per cent. That is a much smaller increase than in January and February, when the year-over-year price index increase was near 30 per cent.
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