Home prices finally falling

That sound you heard when the Canadian Real Estate Association released its numbers Monday was the steam whooshing out of our housing market.

Home sales dropped 12.6 per cent across Canada from March to April and benchmark prices fell 0.6 per cent in what one economist called “a remarkable turn of events.”

“The demand fever in Canadian housing has broken and, who would have thought, all it took was a nudge in interest rates by the Bank of Canada to change sentiment,” said BMO senior economist Robert Kavcic.

The numbers were a far cry from the record-breaking upward flight of property values seen in the fall and winter.

The 0.6 per cent drop in the national MLS Home Price Index in April was among the weakest prints in the past decade, said Kavcic — and the first drop since April 2020.

Prices are still up 23.8 per cent from the year before, “but suffice to say that, in many markets, anyone who bought a home in the first quarter of 2022 is going to be looking at a value below purchase price for a while,” he said.

We had the data on Canada’s major markets last week, but this week we got the big picture.

Markets that saw the biggest price gains during the heady days of the pandemic are now seeing the biggest declines, many of them in Southwestern Ontario.

RBC economist Robert Hogue says the MLS Home Price Index fell in London by -4 per cent from the month before, in Cambridge by -3.9 per cent; Brantford, -2.6 per cent; Niagara region, -1.9 per cent; Toronto, -1.8 per cent; Kingston, -1.8 per cent; Barrie, -1.5 per cent; Kitchenerwaterloo, -1.1 per cent; and Hamilton, -1.1 per cent.

B.C. markets, such as Chilliwack, -1.7 per cent; and Fraser Valley, -0.1 per cent, also saw declines.

Vancouver’s price index increased by 0.3 per cent but it was the smallest rise in almost two years, said Hogue.

Meanwhile, in the more affordable Atlantic Canada and the Prairies, prices continue to climb. The home price index was up 5.6 per cent in Halifax-dartmouth from the month before, Saint John, up 3.2 per cent; Fredericton, 2.7 per cent; and Moncton, 2.4 per cent. Prices also rose moderately in Edmonton, up 1.4 per cent; Regina, 1.2 per cent; Calgary, 0.8 per cent; Saskatoon, 0.6 per cent; and Winnipeg, 0.4 per cent.

Most of Quebec posted modest price gains, said Hogue.

The Bank of Canada rate hiking cycle has proved a game changer — “turning what has been a tremendous tailwind into a stiff headwind for the market” and RBC economists think April was the market peak.

“We think the sizable drop in activity in April marks a turning point for the Canadian market with further cooling on the way,” wrote Hogue.

But the economists view this as a welcome correction, after the unsustainable frenzy of the past two years.

“We expect the burgeoning price correction seen in Ontario and parts of British Columbia to deepen and spread to other markets as market sentiment sours but it’s unlikely to morph into a meltdown. Positive demographic factors will provide a safety net against a hard landing,” said Hogue.

Already there are signs of some markets returning to balance. The sales-tonew listings ratio reached balanced-market territory in April in Toronto, Hamilton, Niagara region, Kitchenerwaterloo and Windsor, RBC notes.

“The demand fever in Canadian housing has broken and, who would have thought, all it took was a nudge in interest rates by the Bank of Canada to change sentiment.” Robert Kavcic BMP senior economist