March 19, 2023 | The Most Splendid Housing Bubbles in Canada: March Update on the Housing Bust

This is the beginning of spring selling season. So let’s see. Home sales in Canada rose by 2.3% in February from January, but that was less of an uptick than it should have been, and on a year-over-year basis, sales plunged 40%, compared to the 37% plunge in January.

Prices of single-family houses in February rose 1.2%. But that was puny compared to the year-ago month-to-month jump of 4.8%.

So year-over-year, prices plunged by 18.5%, the largest drop in the data, according to the Canada Home Price Benchmark Index for single family houses by the Canadian Real Estate Association (CREA).  Since the peak last March, the index has plunged 19.1%.

In terms of Canadian dollars, the Single-Family Home Price Index for Canada ticked up by C$8,900 in February from January, but that was puny compared to the C$44,000 increase a year ago, and so year-over-year the benchmark price plunged by a record 18.5%, to C$781,300, rolling the price back to July 2021.

Hangover after the free-money binge. This most ridiculous home price bubble was triggered by the most ridiculous money-printing binge and interest-rate repression globally and in Canada. But now consumer price inflation is tearing up this strategy, as it ultimately always does. And the Bank of Canada has now raised its main policy rate by 425 basis points to 4.5%. And its Quantitative Tightening is in full swing. Consequently, mortgage rates have risen across the board from the levels a year ago.

Canada’s housing market didn’t even have much of a reset during the Financial Crisis – unlike the US housing market – and a splendid housing bubble ballooned out that.

Greater Toronto Area: The MLS Home Price Index for single-family houses rose by 1.6%, or by C$21,000 in February from March, to C$1.294 million. But this was only about a quarter of the C$80,000 month-to-month jump a year ago. So year-over-year, the index plunged by 19.3%, or by $306,800, both the biggest year-over-year plunges on record:

Greater Vancouver: The MLS Home Price Benchmark Price for single-family houses ticked up by 0.7%, or by C$12,000 in February from January, to C$1.812 million. But the month-to-month jump pales against the C$80,000 jump in February 2022. And so year-over-year, the index plunged by 12.0%:

• From peak in April 2022: -13.7%
• Year-over-year: -12.0%
• Drop in 10 months from peak in April 2022: -C$288,000

Victoria: The single-family benchmark price dropped by 0.4% for the month, despite the spring selling season, to C$1.113 million:

• From peak in June 2022: -14.5%
• Year-over-year: -5.7%

• Drop in 8 months from peak in June 2022: -C$162,200

Hamilton-Burlington metro: The single-family benchmark price jumped by 3.1% for the month, to C$898,000. But the month-to-month jump was less than the 5.3% jump a year ago, and so the year-over-year plunge increased to 23%.

• From peak in February 2022: -23%
• Year-over-year: -23%
• Drop in 12 months from peak in February 2022: -C$268,300.

Ottawa: The benchmark price of single-family houses rose 1.3%% for the month to C$688,500. But last year in February, prices jumped by 5.0%, and so the year-over-year drop worsened to 15.0%:

• From peak in March 2022: -16.7%
• Year-over-year: -15.0%
• Drop in 11 months from peak in March 2022: -C$137,700:

Calgary: The single-family benchmark price jumped 1.7% for the month, to C$584,700. But that was a lot lot less than the 6.6% month-to-month jump in February last year, and so the year-over-year increase got slashed to just 2.2% (from 7.1% in January):

• From peak in May 2022: -2.4%
• Year-over-year: +2.2%
• Drop in 9 months from peak in May 2022: -C$14,100.

Montreal: The single-family benchmark price rose 1.1% for the month to C$589,500:

• From peak in May 2022: -9.9%
• Year-over-year: -6.9%
• Drop in 9 months from peak in May 2022: -C$65,000

Halifax-Dartmouth: The single-family benchmark price fell by 1.6% for the month, undoing most of the increase in January, to C$491,400:

• From peak in May: -12.0%
• Year-over-year: +3.1%
• Drop in 9 months since peak in May: -C$67,100

Quebec City Area: The single-family benchmark price jumped 4.2%, to C$361,500, undoing almost but not quite the plunge in January:

• From peak in May: -6.7%
• Year-over-year: -1.8%
• Drop in 8 months since peak in May: -C$26,000.

Wolf Richter March 19th, 2023

Posted In: Wolf Street

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