Few would believe it just a few weeks ago, but Canadian real estate is falling as fast as it climbed. Canadian Real Estate Association (CREA) data shows benchmark prices fell in June. The benchmark, a typical home, actually declined by an average of nearly $1,000 per day last month. Almost all 2022 gains have been rolled back, but it would still take months at this pace to reverse the recent boom.
Canadian Real Estate Prices Fell $29,000 In June
Canadian real estate prices are cratering fast after the speculative mindset was broken. Canada’s benchmark home price fell to $809,700 in June. It’s a decline of 3.5% (-$29,400) for the month, but still 14.9% ($105,000) higher than last year. These sound like large drops but home prices increased so fast it’s only beginning to make a dent.
Canadian Real Estate Price Growth Is Still High, But Slowing Fast
Home prices are cooling very rapidly at the national level. The monthly decline of $29,400 is the largest recorded in the CREA HPI, and likely the largest ever. Annual growth is still double digits, which is huge. It’s also half the level seen just four months ago, showing rapid deceleration.
Canadian Home Prices Nearly Reversed 2022 Gains
Canadian home prices are down significantly from peak, but aren’t in a correction. The benchmark price peaked in March and is now 6.7% (-$58,400) from that point. Home prices have to drop more than 10% for a correction, but large numbers are tough for most to appreciate. It would take another 8 months at this rate to reverse gains made since the 2020 rate cuts.
The year started with absurdly large growth that made it hard to see any price declines for many. That’s changing fast. Last month, we projected home prices were on target to reverse 2022 gains by the end of August. That assumed the losses didn’t accelerate, which they currently are.
At the current rate, 2022 gains can be lost by the end of this month, a month faster. But once again, it’s still a long way from reversing all of the value inflated by monetary policy. Oh, you heard price gains were due to supply? The global central bank organization, the BIS, disagrees — they attribute the global home price boom to monetary policy missteps.
This week’s rate hike is expected to put a further dent in high home prices. BMO Capital Markets sent clients a note this morning, calling the hike a knock-out. Based on their calculations, a significant correction would need to happen to support a level of activity seen in last year’s tight market. As more inventory comes to market, the correction becomes more significant.
