Canada’s Greatest Real Estate Bubbles: December Update on a Real Estate Crash

The ridiculous spikes, fueled by the Bank of Canada’s interest rate crackdown and QE, are building meter by meter, some lightning fast, others more leisurely.

By wolf richter by WOLF STREET.

Canada’s MLS House Price Index, which tracks all types of homes, fell 1.3% in November from October, and is now down 16.4% from its March 2022 high, according to data from the Canadian Real Estate Association (CREA). This brought the year-over-year drop to 4.4%.

In Canadian dollars, the composite reference price fell by C$142,300 in the eight months since the peak, to C$726,000, roughly where it had been in September 2021.

in the eight months to the peak – then, from July 2021 to March 2022, the reference price had increased by C$162,800. In other words, it has crashed a little less quickly than it had skyrocketed during the final phase of the Bank of Canada’s interest rate crackdown and money-printing spree, which ended in March 2022 with a timid first rate hikewhich was when home prices peaked.

Sales volume in November plummeted 38.9% year-over-year, according to CREA. Buyers have gone on strike over the combination of still sky-high home prices and now much higher mortgage rates. Potential sellers also went on strike; Instead of putting their vacant houses on the market, they are thinking, “and this too shall pass,” and they are waiting for the sudden death of inflation and a Bank of Canada pivot. Every month that they have waited, they have been rewarded with more price drops. It turns out that the one who panics first, panics best.

That eight-month drop in benchmark price since March of 16.4% was by far the largest eight-month drop in CREA data since 2005. Part of this is that there hasn’t been a real drop in housing since the 1980s, and these data don’t go back that far:

Greater Toronto Area: The composite benchmark price fell 0.8% on the month to C$1.284 million, down 18.4% from the March peak and down 5.5% year-over-year. The price is back to roughly where it was in September 2021.

Fall Rate vs. Peak Rate: During the eight months since the peak, the benchmark price plunged by C$245,200. On the way up, over the eight months to the peak, the price had skyrocketed by C$309,900:

Greater Vancouver: The MLS Composite Home Price Index benchmark price fell 1.5% on the month to C$1.132 million:

  • From peak in April: -10.5%
  • Year over year: -0.6%
  • 7-month drop from April peak: -C$133,100
  • Jump in 7 months to peak in April: +C$152,700

Hamilton-Burlington Subway: Prices tend to move in parallel with Toronto, albeit at a lower level. But in the 22 months between the beginning of the Bank of Canada’s money printing spree in April 2020 and the peak in February 2022, the composite reference price has skyrocketed by 71%, which is total insanity. . But then it started to fade and is now down 22.2% in 9 months.

The composite benchmark price fell 0.7% on the month to Cdn$831,000 and is down 9.4% year-over-year.

During those 9 months from the peak, the price crashed a bit faster than it had risen in the 9 months to the peak:

  • 9-month drop from February peak: -C$237,900
  • Jump in 9 months to peak in February: +C$237,100

Spikes like these in real estate are just plain hilarious and a testament to the utterly silly consensus hallucination that pervades bubble markets:

Victory: The composite benchmark price plunged 2.3% over the month and 10.5% from the June high, to Cdn894,000. But given the late start of the decline, year-over-year the price is still up 6.4%.

  • 5-month drop from June peak: -C$91,100
  • Jump in 5 months to peak in June: +C$107,000

Ottawa: The composite benchmark price fell 2.1% on the month to C$631,000, from March 2021:

  • From peak in March: -13.4%
  • Year after year: +0.8%
  • 7-month drop from March peak: -C$97,400
  • Jump in 7 months to peak in March: +C$103,200

Calgary, the oil capital of Canada. Despite the oil boom that began in 2021, prices have now drifted off course. The composite benchmark price fell 0.7% on the month to Cdn513,000:

  • From peak in May: -3.6%
  • Year after year: +10.4%
  • 5-month drop from peak in May: -C$19,200
  • Jump in 5 months to peak in May: +C$63,900:

Montreal: Composite benchmark price fell 1.3% on the month to Cdn505,000:

  • From peak in May: -9.1%
  • Year after year: +2.8%
  • 5-month drop from peak in May: -C$50,800
  • Jump in 5 months to peak in May: +C$54,500:

Halifax-Dartmouth, a normal real estate market until it suddenly went crazy starting in April 2020. During the 25 months from April 2020 to the peak in May 2022, the reference price shot up by 82%, just WOOSH as QE and the interest rate crackdown turned buyers’ brains to mush. And this is now relaxing.

The composite benchmark price plunged 3.0% on the month to C$484,000:

  • From peak in May: -11.5%
  • Year after year: +9.5%
  • 5-month drop from peak in May: -C$63,000
  • Jump in 5 months to peak in May: +C$95,600:

quebec city: Composite benchmark price fell 1.1% on the month to Cdn475,000:

  • From peak in May: -8.7%
  • Year after year: +3.0%
  • 5-month drop from peak in May: -C$45,400
  • Jump in 5 months to peak in May: +C$50,600:

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