Have Canadian home prices hit bottom? Here are some clues

Enter “Canadian house prices” into a Google search and you’ll find endless headlines about the real estate meltdown.

That, combined with rising mortgage rates in 13 years, has pushed countless homebuyers to the sidelines. And many of them are now licking their chips, hoping to buy near the bottom.

To do this requires market timing. Most experts discourage timing for good reason. Measuring price direction can be tricky.

Take the most commonly used price metric in Canada, for example, the Canadian Real Estate Association median home price. The average price in the country is down 18.4 percent from its February peak, and is likely to increase by 20 percent once July numbers come in mid-month.

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

buy some time

If you are a potential home buyer, you will probably want to know when it is safe to return to the water.

I’ll give you some clues and a warning. The caveat is that I am not a fortune-teller nor do I pretend to be a timer for house prices.

However, the following clues are legitimate, and their turning points will coincide with the bottom in most cases.

Prices in your area

As mentioned above, average home prices are unreliable, especially on a national level.

If you see the average price going down, you should dig deeper. Do similar types of homes (four bedroom two-story, for example) sell for a lower price? Or are people simply buying more apartments, causing the average price to drop?

The latter is a major factor at the moment when steep mortgage rates are reducing purchasing power. Economists call it the “combination effect.”

The average prices are also deceptively high because they are constantly misrepresented by high-end sales. A pool of home sales worth more than $3 million can support median prices. But when people stop buying homes worth more than $3 million, average prices can fall. Once again, with mortgages becoming more and more difficult to qualify for, we’re seeing this trend now.

Average prices are a much better measure of true price movement but still suffer from synthetic effects, albeit well below average prices. The problem is that it is impossible to find national average price data.

CREA does not publish data due to restrictions imposed by some real estate boards. We hope this will change one day.

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

Since average data is not available in most areas, people have to rely on home price indexes (HPIs), which you can get from CREA, Teranet, and RPS real estate solutions. HPIs compare similar types of homes, making price comparisons more accurate.

CREA’s release is powerful because it relies on sales in the Multiple Listing Service (MLS), even if those sales haven’t closed yet. Hence, it is time to get the HPI.

Tip: Check your local real estate board’s HPI as most publish local data one to two weeks before CREA.

HPIs like CREA allow you to get accurate details, showing prices for the type of home and location you’re shopping at – for example apartments in Regina.

For signals of a price bottom, you want the HPI in at least your area to start moving sideways, which could lead to a bullish reversal.


Home sales and sales are down thanks to higher prices and buyer uncertainty. In many cases, sellers pull listings because they are not close to the asking price.

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

the exams

When you don’t sell homes, inventories build up. As the number of homes for sale increases, people are getting more desperate and lower their prices. Some are pulling their homes off the market altogether.

Fortunately, in most areas, CREA suggests that people are not on the panic list. But let’s see what happens in the fourth quarter or early next year.

Ideally, you want to see stock growth slow or regress. Again, you can get this data from real estate boards and CREA.

The unemployment

Most people don’t have to sell, as long as they have a job and can make their payments. Housing surrender generally requires increased job losses, and right now, Canada has a record low unemployment rate of 4.9 percent.

The thing is, our strong job market won’t last forever. If the bond market predictions are correct, we are less than 18 months away from a recession. With the traditional two quarters of a negative GDP measure, the US is already at one.

To monitor unemployment, check with Statistics Canada monthly. It would take at least half a percentage point jump in the unemployment rate to start driving job-related forced sales and more than half a percentage point for a real crash.

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

Shift in prices

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

Signal from the Bank of Canada that it is raising rates – which could happen by next year if our uninvited guest, inflation, slows significantly.

Continuous decline in the yield of Canadian five-year bonds

Pricing the bond market at interest rate cuts over the next 12-18 months

By the time these three things happen, a lot of the price-driven selling will be over.

last point: I talk to a lot of liquid real estate investors and most of them are just waiting to snap deals, especially with rising rents and population growth fueling immigration.

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

And if you misread these indicators and misbuy, that’s fine as long as you have a long-term time horizon. It may take two, five or 10 years, but in the long run, real estate values ​​are always growing.

This week’s prices

Even though five-year yields are down 80 basis points from their June peak, banks are still sticking to cutting five-year uninsured fixed interest rates.

The bankers I speak to attribute this to perceived credit risk in the financing markets, illiquidity and volatility (affecting financing and hedging costs) and static competition (banks don’t have to move if other banks don’t move).

Meanwhile, the country’s lowest five-year insured fixed rate fell 40 basis points from a peak of 4.84 percent in July.

Lowest mortgage rates available nationally

term non-believer Provider Believer Provider
1 year fixed 4.59% Manulife 4.39% true north
2 years fixed 4.84% RBC 4.54% QuestMortgage
3 years fixed 5.09% HSBC 4.54% marathon
4 years fixed 5.19% Simplii 4.59% QuestMortgage
5 years fixed 5.09% HSBC 4.44% true north
10 years fixed 5.84% HSBC 5.84% HSBC
Worker 4.15% alternative 3.50% true north
5 year hybrid 4.64% HSBC 4.74% Scotia eHome
hello 4.55% HSBC Unavailable Unavailable

Prices as of Wednesday from providers that advertise rates online and lend to at least nine counties. Insured rates apply to those who buy with less than 20 percent down payment, or those who transfer a previously insured mortgage to a new lender. Uninsured rates apply to refinances and purchases over $1 million and may include premiums from the applicable lender rate. For providers whose rates vary by county, their highest rate is shown.

Robert McCallister is an interest rate analyst and mortgage strategist and editor at MortgageLogic.news. You can follow him on Twitter at Tweet embed.

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