The Canadian Real Estate Association said average house prices in Canada dropped a record 12 per cent in 2022, while sales fell more than 39 per cent from December 2021.
The average national home price in December was $626,318, down from over $816,000 when the market peaked in early 2022, said CREA in a new report.
The once high-flying Canadian real estate market has been hit hard by a series of interest rate hikes over the past year, and many observes expect more trouble ahead as homeowners grapple with mortgages rates over 6 per cent.
But despite ongoing economic worries, national home sales have remained almost stable since the summer, “suggesting the downward adjustment to sales activity from rising interest rates and high uncertainty may be in the rear-view mirror,” CREA said in the report.
“The adjustment to higher rates is not fully over, but one major sign is that sales haven’t really fallen any more since last summer. The market also tightened up in December,” Shaun Cathcart, senior economist at CREA, told the Star.
However, the 12 per cent drop was still an “all-time record,” ahead of similar collapses in the 1980s and 2008.
The national average price is heavily influenced by sales in Canada’s two most active and expensive housing markets, said CREA: Greater Vancouver and the Greater Toronto Area. Excluding those two markets cuts about $118,000 from the average national price.
CREA’s benchmark Home Price Index was $730,600 in December, down 1.6 per cent from the previous month. That represents a 13.2 per cent decrease since February, according to the industry group, when prices reached their peak before the Bank of Canada started hiking interest rates to curb inflation.
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A slight rise of 1.3 per cent in Canadian home sales was reported in December from November, while the number of newly listed properties dropped 6.4 per cent month-over-month.
CREA expects average home prices to decline a further 5.9 per cent in 2023. But prices will rebound 3.5 per cent in 2024, it said. Home sales are forecasted to rise by 10.2 per cent in 2024 as markets continue to return to normal.
The “decline has already happened over the course in 2022; however, the record-setting start to that year will be reflected as a decline this year as prices are not expected to be anywhere near those record levels in 2023,” CREA said.
Still, rate hikes could spoil hopes of a turnaround. Higher rates make it hard for first time buyers to qualify for a mortgage and enter the market, “and if the Bank of Canada raises interest rates further and we have a recession, then I would not be surprised if house prices fell more,” said Jim Davies, a professor emeritus at the Department of Economics, University of Waterloo.
In the Greater Toronto Area, the average home price in December was $1,106,000 — a 1.1 per cent decline from November and 8.9 per cent from the previous year.
In the GTA, “we don’t have enough product in the market” as new listings are still down, and that justifies why the Toronto market is still expensive, said Desmond Brown, a Toronto real estate agent.
While some prefer to sit and wait, “there are still a lot of people who have to buy and sell for legitimate reason,” he added. “The provincial government and city of Toronto are doing their best to try to bring in supply, but that supply is not coming soon enough.”
With the drop in sales, a positive outcome for new buyers is their ability to negotiate. “Now, properties are sitting longer in the market, and they are able to negotiate a price that ends up in most cases under the asking price,” Brown added.
Fares Alghoul is a Toronto-based general assignment reporter for the Star. Reach him via email: email@example.com
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