Have Canadian home prices bottomed out? Here are some clues

Type “Canadian house prices” into a Google search and you’ll find endless headlines about the housing implosion.

That, and 13-year highs in mortgage rates, have pushed countless homebuyers away. And many are now licking their chops, hoping to buy closer to the bottom.

To do this, you need to time the market. Most experts discourage timing for good reason. Assessing price direction can be a roll of the dice.

Consider the most widely used measure of price in Canada, for example, the average price of a house from the Canadian Real Estate Association. The country’s average price has slipped 18.4% from February’s peak, and likely more than 20% once July figures are released mid-month.

But the averages are misleading. More on that in a minute.

buy time

If you’re a potential buyer, you probably want to know when it’s safe to get back in the water.

I’ll give you some clues and a caveat. The caveat is that I am not a fortune teller and do not claim to be a real estate price timekeeper.

The indices that follow are legitimate, however, and their turns will coincide with a bottom in most cases.

Price in your area

As mentioned above, average house prices cannot be relied upon, especially at the national level.

If you see the average price dropping, you need to dig deeper. Do similar types of houses (four-bedroom two-story, for example) sell for less? Or are people just buying more condos, driving down the average price?

The latter is a major factor at the moment, as high mortgage rates reduce purchasing power. Economists call this the “composition effect”.

Average prices are also deceptively high as they are constantly skewed by high-end sales. A bunch of home sales over $3 million can support average prices. But when people stop buying homes over $3 million, average prices can drop. Again, with mortgages getting harder to get, we’re seeing this trend now.

Midpoint prices are a much better indicator of actual price action, but they still suffer from composition effects, although much less than midpoint prices. The problem is that it is impossible to find national median price data.

CREA does not publish the data due to the restrictions of certain real estate boards. Hopefully that will change one day.

In the meantime, if you’re in Ontario or British Columbia, use a site like HouseSigma for median prices. It even projects median prices long before official data is released.

Since median data is not available in most areas, people have to rely on house price indices (HPIs), which you can get from CREA, Teranet, and RPS Real Property Solutions. HPIs compare similar home types, making price comparisons much more accurate.

CREA’s version is strong because it’s based on sales in the Multiple Listing Service (MLS), even though those sales haven’t closed yet. Therefore, this is an HPI as timely as possible.

Tip: Check your local real estate board’s HPI, as most release local data one to two weeks before the ACI.

HPIs like CREA allow you to get detailed information, showing prices for the type of home and location you’re looking for – condos in Regina, for example.

For signs of a price bottom, you want your region’s HPI to at least start moving sideways, potentially signaling an upward reversal.


Home sale prices and sales fell due to soaring rates and buyer uncertainty. In many cases, sellers pull listings because they don’t come close to the asking price.

What you want to see is that home sales are at least starting to stabilize. Check your local real estate board as they publish this data monthly.


When homes don’t sell, inventory builds up. As the number of homes for sale increases, people become increasingly desperate and reduce their prices. Some are taking their homes off the market completely.

Fortunately, in most areas, CREA suggests people aren’t panicking. But let’s see what happens in the fourth quarter or early next year.

Ideally, you want to see stock growth slow down significantly or pull back. Again, you can get this data from real estate boards and ACI.


Most people don’t have to sell, as long as they have a job and can make their payments. The housing capitulation usually necessitates an increase in job losses and currently, Canada has a record unemployment rate of 4.9%.

The fact is that our strong labor market will not last forever. If bond market forecasts are correct, we are less than 18 months from recession. According to the traditional two quarters of negative GDP measurement, the United States is already at one.

To monitor unemployment, consult Statistics Canada monthly. It will take at least a half-percentage-point jump in unemployment to start driving employment-related sell-offs and well over a half-point for a full-blown crash.

Just remember that it can take months for rising unemployment to translate into home sales.

A turnaround in rates

If you’re a secondary buyer waiting for your big break, you’ll want to see:

· A signal from the Bank of Canada that it is done raising rates – which could happen by next year if our uninvited guest, inflation, decelerates significantly.

A continued decline in Canadian five-year bond yields

Bond market pricing in rate cuts over the next 12-18 months

By the time these three things happen, much of the rate-driven selling will have come to an end.

Period : I speak with a lot of liquid real estate investors and most are just waiting for a bargain, especially given soaring rents and population growth fueled by immigration.

Every serious buyer on the sidelines right now is looking at these same clues. If you are a potential buyer, you should too.

And if you’ve misinterpreted these indicators and mis-chosen your buy, that’s okay as long as you have a long-term time horizon. It may take two, five or ten years, but over the long term, real estate values ​​always go up.

Rates this week

Although five-year bond yields have fallen 80 basis points from the June high, banks are still resisting lowering their uninsured five-year fixed rates.

Bankers I talk to attribute this to perceived credit risk in funding markets, illiquidity and volatility (which affect funding and hedging costs) and static competition (banks don’t have to move if the other banks do not move).

Meanwhile, the nation’s lowest five-year fixed insured rates are down 40 basis points from their peak of 4.84% in July.

The lowest mortgage rates available nationwide

1 year fixed 4.59% Manulife 4.39% True North
2 year fixed 4.84% RBC 4.54% Mortgage Quest
fixed 3 years 5.09% HSBC 4.54% Marathon
4 years fixed 5.19% Simplii 4.59% Mortgage Quest
5 years fixed 5.09% HSBC 4.44% True North
10 years fixed 5.84% HSBC 5.84% HSBC
Variable 4.15% Alterna 3.50% True North
5 year old hybrid 4.64% HSBC 4.74% Scotia eHOME
HELOC 4.55% HSBC N / A N / A

Rates are as of Wednesday from providers who advertise rates online and lend in at least nine provinces. Insured rates apply to those buying with less than 20% down or those transferring a pre-existing insured mortgage to a new lender. Uninsured rates apply to refinances and purchases over $1 million and may include applicable lender rate premiums. For providers whose rates vary by province, their highest rate is shown.

Robert McLister is an interest rate analyst, mortgage strategist and editor of MortgageLogic.news. You can follow him on Twitter at @RobMcLister.

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