Canadian Real Estate Prices Exit Holding Pattern, Dive Towards Hard Landing

After more than 3 years of moving sideways, Canadian home prices picked a direction—down. Canadian Real Estate Association (CREA) data shows sales fell in January, with the trade industry attributing it to winter storms. Sellers didn’t seem to mind the storms either, continuing to brave the conditions to hold open houses, like the gosh darn heroes they are. Oh, and did we mention the sharpest drops in sales weren’t in storm regions, but out in Western Canada where a heatwave sent temps to double-digit highs?  

Canadian real estate prices continue to slide. The price of a typical home fell 0.4% (-$2,300) to $658,000 in January, 5.0% (-$34,400) lower than last year. They’re now the lowest since February 2021, a month shy of setting a new 4 year low. 

Home prices have kicked off a second wave of corrections. After the rollercoaster of peaking and plunging in 2022, it appears the market struggled to figure out the direction for over 3 years, trading in a narrow band. The market appears to have made up its mind with the recent sharp plunge, with the second leg correction bringing prices 22.58% (-$191,900) lower than peak. While substantial, prices remain 26.4% (+$137,600) higher than they started the 2020s with, which really highlights just how insane the boom was.  

Any sign of the recovery occurring last year has begun to fade, though why is up for debate. There were 22,533 homes sold in January, down 16.2% from last year. It was slightly above 2023, which came in as the weakest January in a decade. 

CREA attributes the slow market to adverse weather. “The monthly decline in national home sales was driven primarily by less activity in the Greater Golden Horseshoe and Southwestern Ontario, suggesting that the story was probably more about a historic winter storm than a downshift in demand,” writes CREA senior economist Shaun Cathcart. 

That narrative may fly in Ontario, but not in Western Canada that saw record setting warm weather. Especially in Alberta and BC, where both provinces saw double-digit, multi-year temperature highs. Despite the balmy highs reached in Vancouver (13.8°C) and Calgary (16.9°C), both regions saw double-digit declines in home sales. Ontario was actually underrepresented for the drag. It represented a third of the national decline, despite its population and existing home sales typically representing roughly 40% of the national volume. 

It was an odd take, but we’ll chalk it up to the medical condition known as OTICU—Ontario is the Center of The Universe. The condition of unknown origin appears to target policymakers and economists. Common side effects are assuming whatever you encountered that day applies to the whole country.  

The, um, “bad weather” that impacted buyers didn’t seem to deter sellers, though. There were 61,850 new listings in January, 6.2% lower than last year but less than half the rate of decline seen in home sales. That’s the second-most listing for Janaury in at least a decade of data, only behind the surge last year. 

The shift in demand balance is reinforced further by the sales to new listings ratio (SNLR) at 36.4% in January, 4.4 points lower than last year. That places the market firmly in a buyers’ market, where the industry sees prices falling due to “oversupply.” Even in weak markets, January rarely sees the SNLR this low, as most sellers hit pause until the spring. An inflow of new listings may be a sign this market won’t be firming in the near-term. 

Canadian real estate prices continue to fall. Sales are weakening further, and regardless of the impact of weather, it’s clear buyers have the leverage. Whether the market adjusts price expectations in time for spring will likely determine whether or not activity picks up. From the data we’re seeing right now, that doesn’t appear to be the case.