The Most Splendid Housing Bubbles in Canada: December Update on a Housing Bust

The ridiculous spikes, fueled by the Bank of Canada’s interest rate repression and QE, unwind metro by metro, some lightning fast, others more leisurely.

By Wolf Richter for WOLF STREET.

The Canada MLS Home Price Index, which tracks all types of homes, dropped by 1.3% in November from October, and is now down 16.4% from the peak in March 2022, according to data from the Canadian Real Estate Association (CREA). This brought the year-over-year decline to 4.4%.

In Canadian dollars, the composite benchmark price dropped by C$142,300 in the eight months since the peak, to C$726,000 – about where it had been in September 2021.

In the eight months up to the peak – so from July 2021 through March 2022 – the benchmark price had risen by C$162,800. In other words, it has plunged a little less fast than it had spiked on the way up during the final phase of the Bank of Canada’s interest-rate repression and money-printing binge, which ended in March 2022 with a first timid rate hike, which was when home prices peaked.

Sales volume in November plunged by 38.9% year-over-year, according to CREA. Buyers have gone on strike due to the combination of still sky-high home prices and now much higher mortgage rates. Potential sellers have gone on strike too; instead of putting their vacant homes on the market, they’re thinking, “and this too shall pass,” and they’re waiting for the sudden death of inflation and a Bank of Canada pivot. Each month that they’ve waited, they’ve been rewarded with further price drops. Turns out, he who panics first, panics best.

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

Greater Toronto Area: The composite benchmark price dropped 0.8% for the month to C$1.284 million, down by 18.4% since the peak in March, and down by 5.5% year-over-year. The price is roughly back where it had been in September 2021.

Plunge speed versus spike speed: Over 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 spiked by C$309,900:

Greater Vancouver: The MLS Home Price Index composite benchmark price dropped 1.5% for the month to C$1.132 million:

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

Hamilton-Burlington metro: Prices tend to move in parallel with Toronto though 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 benchmark price exploded by 71%, which is totally nuts. But then it started unwinding, and has now plunged by 22.2% in 9 months.

The composite benchmark price dropped 0.7% for the month to C$831,000, and is down 9.4% year-over-year.

Over those 9 months since the peak, the price plunged just a tad faster than it had spiked in the 9 months to the peak:

Drop in 9 months since peak in February: -C$237,900
Jump in 9 months to peak in February: +C$237,100

Spikes like these in real estate are just funny – and a testimony to the utterly silly consensual hallucination that pervades bubble markets:

Victoria: The composite benchmark price plunged 2.3% for the month, and by 10.5% from the peak in June, to C$894,000. But given the late start of the decline, on a year-over-year basis, the price is still up by 6.4%

Drop in 5 months since peak in June: -C$91,100
Jump in 5 months to peak in June: +C$107,000

Ottawa: The composite benchmark price dropped 2.1% for the month to C$631,000, back to March 2021:

From peak in March: -13.4%
Year-over-year: +0.8%
Drop in 7 months since peak in March: -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 south. The composite benchmark price dropped 0.7% for the month to C$513,000:

From peak in May: -3.6%
Year-over-year: +10.4%
Drop in 5 months since peak in May: -C$19,200
Jump in 5 months to peak in May: +C$63,900:

Montreal: The composite benchmark price dropped 1.3% for the month to C$505,000:

From peak in May: -9.1%
Year-over-year: +2.8%
Drop in 5 months since peak in May: -C$50,800
Jump in 5 months to peak in May: +C$54,500:

Halifax-Dartmouth, a normal-ish housing market until it suddenly went nuts starting in April 2020. Over the 25 months from April 2020 to the peak in May 2022, the benchmark price exploded by 82%, just WHOOSH, as QE and interest-rate repression turned buyers’ brains to mush. And this is now unwinding.

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