Canadian home prices fall 12% in November from last year as winter chill sets in

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Benchmark home prices fell 1.4 per cent and sales volumes declined by 3.3 per cent on a month-over-month basis in November as real estate markets continued to feel the chill from rising interest rates, data released Thursday by the Canadian Real Estate Association showed.

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According to CREA’s figures, 60 per cent of domestic markets saw lower sales in November, led by declines of 15.3 per cent in the Greater Vancouver Area, 13.8 per cent in Victoria, 12.1 per cent in Ontario’s Niagara Region and 11.9 per cent in Regina.

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“November’s housing data from across Canada came in as expected — still pretty quiet — and that is unlikely to improve this winter with the Bank of Canada raising rates again last week,” Shaun Cathcart, CREA’s senior economist, said in the report. “It will be interesting to see what buyers do when listings start to come out in big numbers in the spring, and even more interesting to see what happens a little later when the Bank of Canada, now widely thought to be at or very near the top of its tightening cycle, starts to eventually cut rates.”

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The MLS Home Price Index was down 4.4 per cent from November 2021 and actual average prices were down 12 per cent year-over-year to $632,802 in November — a 1.8 per cent decline from October.

The monthly decline in sales wiped out a small gain posted in October, while on an annual basis transactions were off by 38.9 per cent from a near record in November 2021.

Although there has been a sharp drop in national transactions, Bank of Montreal economist Robert Kavcic said the current market is the most buyer-friendly since 2012.

“Still, the market balance softened further in the month, with the sales-to-new listings ratio weakening to 49.9 per cent in November,” Kavcic said in a note to clients. “That marks the most buyer-friendly level since 2012, and leaves the market with softer conditions than those seen during the 2017-18 period.”

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Toronto realtor Cailey Heaps believes that national sales are down primarily because buyers are risk averse.

“I’m calling it the fear of making a mistake,” Heaps said in an interview. “Potential buyers are thinking, if they buy now, what will people think if the market goes down? They could have bought the same house for less money in six months, or is this the right time for getting into the market?”

Heaps further explains that the current buyer’s mindset seems to be focused on someone else expressing interest in their preferred property before they are ready to bid.

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“They’re scared to bet. They need external validation. When someone else expresses interest and registers an offer, then they’re ready to jump in. So, it seems they’ve lost confidence in their decision making and whether this is the right time to enter the market.”

Despite fewer listings and buyers in the market, Heaps believes that we’re experiencing a period of stabilization.

“The downward pressure on pricing seems to have paused and the volume of sales has gone down slightly but it’s not drastic — and we know that interest rates are likely gonna stay where they are now for a long time,” she said. “All of those factors are indicating that we are in a period of stabilization.”

She added that prices are not likely to appreciate for nine to 18 months.

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