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Housing price slump defies logic for some

June 16, 2022

Canadian housing prices peaked in February 2022, analysts say, and have been wafting downward ever since in major markets. That is until May, when prices took the sharpest drop month over month since the fall of 2019.
Suburban housing markets have taken the biggest hit, notably in the 905 region of Southern Ontario and B.C.’s Fraser Valley, both of which led local price and increases in 2021.
In Ontario’s York Region, average detached house prices dropped by more than $300,000 since February. In Hamilton, the May average composite home price dropped 1.7 per cent from April to below $1 million ($995,408) for the first time in 2022.
In the Fraser Valley, housing sales plunged 54 per cent from a month earlier and the average detached house price dropped by 2.4 per cent.
In Richmond, B.C, at least three home sellers slashed asking prices—once as high as $1.8 million—by up to $300,000 after the Bank of Canada raised lending rates 50 basis points on June 1, according to REW.ca, the largest real estate listing service in Metro Vancouver.
Some are puzzled by the quick reversal of what had been one of the biggest two-year housing booms in Canadian history.
Faith Wilson, president of faithwilson|Christie’s International, and a near-three-decade realtor in B.C.., said this time is different.
The 2008 slump was triggered by a massive global financial crisis; downturns in 2016 and 2018 were largely the result of “an avalanche” of government anti-demand policies, she explained.
“But right now, B.C. [and most of Canada] is enjoying near full employment, annual economic growth is surging and we have a record level of immigration,” Wilson said.
“Today the catalyst for the dip is said to be rising interest rates. But, even with recent increases, real mortgage costs remain far below historical levels, and are offset with the calmer home prices,” she said.
Canadian composite home prices have fallen sequentially for the last three months, after hitting a record of $816,720 in February, according to the Canadian Real Estate Association.
Some economists predict the price dip will continue—at a slow and shallow pace.
In a note to clients on June 8, Desjardins’ senior director of Canadian economics Randall Bartlett and senior economist Hélène Bégin said prices could possibly fall 15 per cent from their February 2022 peak by the end of 2023 but would remain above pre-pandemic levels.
“While some Canadians may lose their sleeves, we don’t expect Canadian households on the whole to lose their shirts,” the economists quipped in the report.



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