The Most Splendid Housing Bubbles in Canada: December Update on a Housing Bust
The ridiculous spikes, fueled by the Bank of Canada’s rate cut and QE, are unwinding metro after metro, some lightning fast, some more leisurely.
By Wolf Richter for WOLF STREET.
The Canada MLS Home Price Index, which tracks all types of homes, fell 1.3% in November from October and is now 16.4% below its March 2022 peak, according to data from the Canadian Real Estate Association (CREA) . The year-on-year decline was 4.4%.
In Canadian dollars, the benchmark composite price has fallen by C$142,300 to C$726,000 in the eight months since the peak — about the same as September 2021.
In the eight months up to the summit – i.e. from July 2021 to March 2022 – the benchmark price had increased by CAD 162,800. In other words, it’s plummeted a little less quickly than it had soared on the way up during the final stretch of the Bank of Canada’s interest rate suppression and money-printing binge, which ended with a first tentative rate hike in March 2022. that was when home prices were at their peak.
According to CREA, sales volume in November fell by 38.9% year-on-year. Buyers have gone on strike over the combination of still sky-high home prices and now much higher mortgage rates. Potential sellers have also gone on strike; Instead of putting their vacant homes on the market, they think, “And that too will pass,” and they wait for the sudden end of inflation and a turning point for the Bank of Canada. Every month they waited they were rewarded with more price drops. It turns out that whoever panics first, panics best.
That 16.4% eight-month drop in the March benchmark price was by far the largest eight-month drop in CREA data since 2005. Part of it is that there hasn’t been a real home bust since the 1980s, and that data doesn’t go so far back:
Greater Toronto Area: The benchmark composite price fell 0.8% for the month to CA$1.284 million, down 18.4% from the March peak and down 5.5% year-on-year. The price is roughly back where it was in September 2021.
Dive Speed Versus Top Speed: In the eight months since the peak, the benchmark price plunged CAD$245,200. On the way up, the price had increased by C$309,900 in the eight months to the peak:
Greater Vancouver: The MLS Home Price Index composite reference price fell 1.5% for the month to C$1.132 million:
- From April peak: -10.5%
- YoY: -0.6%
- Drop in 7 months since April peak: -133,100 CAD
- Jump in 7 months to peak in April: +C$152,700
Hamilton-Burlington Tube: Prices tend to move in line with Toronto, albeit at lower levels. But in the 22 months between the start of the Bank of Canada’s money-printing frenzy in April 2020 and its peak in February 2022, the composite benchmark price exploded by 71%, which is completely insane. But then it started to unwind and is now down 22.2% in 9 months.
The benchmark composite price fell 0.7% for the month to CA$831,000 and is down 9.4% year-on-year.
In the 9 months since the peak, the price has fallen just a little faster than it had risen in the 9 months to the peak:
- Drop in 9 months since February peak: -237,900 CAD
- Jump in 9 months to peak in February: +C$237,100
Spikes like this one on real estate are just hilarious — and a testament to the utterly silly consensual hallucination that pervades bubble markets:
Victoria: The benchmark composite price fell 2.3% for the month and 10.5% from the June peak to C$894,000. But given the late start of the decline, the price is still up 6.4% year over year.
- Drop in 5 months since June peak: -C$91,100
- Jump in 5 months to peak in June: +C$107,000
Ottawa: The composite benchmark price fell 2.1% to CAD$631,000 for the month, back to March 2021:
- From March peak: -13.4%
- YoY: +0.8%
- Drop in 7 months since March peak: -C$97,400
- Jump in 7 months to peak in March: +C$103,200
Calgary, Canada’s oil capital. Despite the oil boom that started in 2021, prices have now turned down. The composite benchmark price fell 0.7% to C$513,000 for the month:
- From peak in May: -3.6%
- YoY: +10.4%
- Drop in 5 months since May peak: -19,200 CAD
- Jump in 5 months to peak in May: +C$63,900:
Montreal: The composite benchmark price fell 1.3% on the month to C$505,000:
- From peak in May: -9.1%
- YoY: +2.8%
- Drop in 5 months since May peak: -50,800 CAD
- Jump in 5 months to peak in May: +C$54,500:
Halifax Dartmouth, a normal real estate market until it suddenly went crazy from April 2020. In the 25 months from April 2020 to the peak in May 2022, the benchmark price exploded 82%, only WHOOSH, as QE and interest rate suppression turned into buyers’ brains to a pulp. And that is now resolved.
The composite benchmark price plunged 3.0% to C$484,000 for the month:
- From peak in May: -11.5%
- YoY: +9.5%
- Drop in 5 months since May peak: -C$63,000
- Jump in 5 months to peak in May: +C$95,600:
Quebec: The composite benchmark price fell 1.1% on the month to C$475,000:
- From peak in May: -8.7%
- Year-on-year: +3.0%
- Drop in 5 months since May peak: -C$45,400
- Jump in 5 months to peak in May: +C$50,600:
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