As Bank of Canada rates rise and QT mortgage rates rise, some practically amusing price spikes unwind very quickly.
By Wolf Richter for WOLF STREET.
The Canadian housing market is trying to figure out where the reality is? After the era of ridiculous house price spikes, triggered by the Bank of Canada’s interest rate crackdown and QE, the Bank of Canada must now fight runaway inflation by raising interest rates. interest and asset shed (QT), which has driven up mortgage rates, making them indigestible for hyper-inflated markets, although not all markets are hyper-inflated, as we will see in a moment.
Thus, the overall Teranet-National Bank home price index for 11 cities plunged 3.1% in September from August, the largest month-over-month drop in history, after plunged 2.4% in August from July, which was then the largest on record. Lehman’s bankruptcy fall in December 2008.
Over the past four months, the index has fallen 7.0%, the largest four-month drop on record. The four months of declines reduced the year-over-year peak of the range from 19% in March and April to 6.0% in September.
House prices in Victoria fell 6.9% in September compared to August. In Vancouver, prices fell 3.9% in September, after falling 2.0% in August. In Hamilton, prices fell 3.3% in September after falling 5.8% in August, and are down 13.5% in three months. In Toronto, prices fell 3.0% in September, after plunging 4.0% in August, and are down 11.1% in three months. in Ottawa, prices fell 3.5% for the month, after dropping 3.1% in August; etc But in the two oil cities, Calgary and Edmonton, where prices hadn’t budged much in the past 14 years, the index hit new highs.
hamilton, Ontario, had become Canada’s most splendid housing bubble of all time in January 2021 when it overtook Vancouver, as measured by the Teranet-National Bank Home Price Index (the index was pegged to 100 in June 2005 for all cities) . Hamilton had already passed Toronto months earlier. These price increases were so extreme it was funny.
But now, hot air is coming out of this splendid real estate bubble. In September, prices plunged 3.3% from August, after falling 5.8% in August from July. In the past four months – since the ridiculous peak-tippy-top in May – prices have fallen 13.5%, reducing the year-over-year price increase to 5.6% .
In the Greater Toronto Area, after the ridiculous peak peaked in May, home prices plunged 3.0% in September from August. Over the four months, the index plunged 11.1%, reducing the year-over-year gain to 4.5%:
In Greater Vancouver, house prices plunged 3.9% in the month after falling 2.0% the previous month. Since the April high, prices have fallen 7.8%, bringing the year-over-year increase down to 3.9%:
In Victoria, home prices plunged 6.9% in September from August and are down 9.4% from May’s peak. This reduced the year-over-year gain to 4.7%:
The Teranet-National Bank Home Price Index methodology is based on “repeat sales” which tracks the price of the same home each time it is sold over time. Unlike median prices, the “repeat sales” method is not affected by a change in the mix of homes sold. The data here is not seasonally adjusted.
In Halifax, after its extremely splendid housing bubble with year-over-year price spikes of around 35%, prices have fallen 8.8% since the peak in June, with September roughly unchanged from to August, after prices plunged 5.3% and 3.6% in July and August respectively. In those months, year-over-year gains were roughly halved, to 16.4%:
To Montrealhouse prices fell 3.3% in September from August and 4.9% from the June peak, reducing the year-over-year gain to 10.8%:
In Winnipeghome prices fell 3.2% for the month and are down 4.5% from the peak, which reduced the year-over-year gain to 5.9%:
In Ottawa, house prices plunged 3.5% in September after plunging 3.1% in August and are down 8.0% from the peak in June. They are still up 5.0% year-on-year:
In Quebec, house prices fell 1.4% in September and are down 2.4% from the peak in July. That left the year-over-year gain at 10.5%.
In Calgary, Canada’s oil capital, home prices edged up 0.3% in September to a new high and rose 14.7% year-over-year. Prices had remained roughly flat from mid-2007 to mid-2020, when the Bank of Canada’s money-printing spree sent the market skyrocketing. It’s not really a real estate bubble anymore, although it was quite splendid until mid-2007:
In Edmonton, Also in Canada’s oil patch, house prices also rose 0.3% to a new high, taking the year-over-year gain to 5.6%, after 15 years of virtually no increases house prices, following the oil bubble until mid-2007:
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