Canadian Home Prices are Falling- Is the Real Estate Market Becoming Cooler?

Due to higher interest rates, Canadian home prices have fallen 6% to $746,000 in April. Home sales also reduced by 12% nationally in April. According to the Canadian Real Estate Association, the biggest drops were seen in cities like Toronto.

In February 2022, the prices peaked at a record high of over $816,000. The average home prices have now declined for two months in a row. In March, the average price stood at $796,000. April is usually an important month for the real estate market.

CREA chair Jill Oudil said, "Following a record-breaking couple of years, housing markets in many parts of Canada have cooled off pretty sharply over the last two months, in line with a jump in interest rates and buyer fatigue."

CREA also stated the average selling price could be misleading as it's easily skewed by expensive and numerous sales in big cities Vancouver and Toronto. CREA highlighted House Price Index (HPI) as a better gauge of the market as it adjusts for the volume and type of homes sold. Interestingly, the HPI reduced by 0.6% in April. It was the first monthly decline in two years.

Though the home prices are lower than the recent peak, they are still approximately 7% higher than what they were a year ago.

Bad News for Sellers and Recent Buyers

Though the lower prices might be good news for potential buyers, they are bad for sellers, especially those who have already bought somewhere else.

Buyers who recently bought properties at the highs assuming their lenders would loan them a certain amount, are now upset as the banks value property less than expected during the appraisals process. So, such buyers will need to develop more than they expected upfront.

Ontario Housing Reached New Highs

Ontarian real estate markets have seen a record-breaking first quarter in 2022 as housing prices reached new heights and sellers remained well-positioned. As of March 2022, the average price of an Ontario home was $1,052,920, while it was $1,269,900 in the Greater Toronto Area.

The prices of detached homes in the four Golden Horseshoe communities,  Cambridge, Barrie, Kitchener-Waterloo, and Oshawa, surpassed $1 million for the first time.

TRREB's Opinion

The Toronto Regional Real Estate Board (TRREB) will be releasing its figures on housing prices next week. It said when the Bank of Canada raised interest rates last month and signaled more hikes are likely later this year, it had a cooling effect on home prices. It also said that housing prices are still up by double digits over the year before. Though there may be decreases from month to month, immigration, high employment, and a lack of housing supply mean GTA housing prices will likely remain strong over the longer term, TRREB believes.

Some areas are seeing smaller price drops as compared to others. For instance, as more people go back to the office in downtown Toronto, prices in the city's core will likely hold their value, even if the home prices fall further in the next few months.


Previous Post Next Post