Real estate prices went down again – is it a good time to buy home in Canada?
In October, real estate prices in Canada kept falling for the 8th month in a row, as buyers and sellers were trying to adjust to higher interest rates conditions.
According to the Canadian Real Estate Association (CREA), the benchmark home price was down by 1.2% from September and stopped at $756,200 (US$569,910), marking the smallest monthly drop since May.
As a result, the overall prices decrease from their February peak now is 10% on a seasonally-adjusted basis. Meanwhile, the prices are now flat on a year-over-year basis.
“October brought one more piece of data suggesting the slowdown in Canadian real estate markets is coming to its end,” – Shaun Cathcart, CREA’s senior economist, noted. As a proof of market recovery, he pointed to October’s 1.3% sales increase, which was the first one since February.
Canada’s housing market weakness has been caused by interest rate hikes. The borrowing costs growth following years of sky-rocketing home prices has pushed many buyers out of the market and led to changes in home values.
However, economists and investors are starting to believe that the central bank is approaching the end of its rate-increases cycle. In October, the Bank of Canada raised its key lending rate by 0.5% and not by 0.75% like many had expected.
That could encourage more people who postponed selling their properties to finally enter the market, supporting sales growth. The number of new listings was up by 2.2% last month compared to September, exceeding the sales increase and increasing the pressure on prices.
As a result, the total amount of inventory available in the market in October reached 3.8 months, which remains lower than the long term average number but is still much higher than the record lows of this year.
We have recently got some interesting input from one of our biggest mortgage lender that prices might have bottomed (at least in the GTA) in July-August and started to slowly creep up over September-November period. This could signal that for some buyers it might be a good opportunity to buy a home in GTA at the discount.
Interestingly enough, with almost 25% price drop in the detached segment from February to July it actually easier to qualify for the mortgage today despite sharply increased interest rates.