Last month Canadian real estate prices continued their path to a lighter future. Canadian Real Estate Association (CREA) data shows the price of a composite benchmark (typical) home fell in July. It marked half a year of slowing annual growth, as rate cuts fail to rejuvenate demand for homes at current prices. Home prices have also set lower and lower peaks, often a bearish sign indicating fewer buyers are willing to pay previously lofty levels.
Canadian Real Estate Prices Are Printing Lower Annual Peaks
The price of a typical home across Canada.
Source: CREA; Better Dwelling.
Canadian real estate prices slipped lower last month. The price of a benchmark, or typical, home fell 0.8% (-$5,800) to $724,800 in July. It’s now 3.9% (-$29,100) lower than the same month last year. Not exactly in a downward spiral, with prices at a similar level to three years ago. It may appear boring, but the seasonal peaks are beginning to form an interesting sign.
Typically prices peaking at lower and lower highs is a sign of exhausted demand. Fewer qualified buyers are jumping into the market as prices approach the previously failed peak. For the benchmark, this is the third peak—an all-time high, with the two following peaks getting lower each time. This often indicates the pool of buyers who believe prices should be higher, is shrinking, typically marking the end of a period of exuberance.
Canadian Real Estate Returns To Negative Growth
The 12-month change in the benchmark price of a home across Canada.
Source: CREA; Better Dwelling.
Home prices are in a downward trend, with few reasons to see anything change in the next few reports. Annual growth has slowed for six consecutive months, with July coming in at the lowest rate since June 2023. Not all that long ago, but a return to negative growth with soft demand is a less-than-ideal setup.
The price of a home might be similar to 3-years ago, but prices have significantly declined since the all-time high. Last month’s benchmark was 14.9% (-$127,200) lower than the March 2022 record high. A pullback of this size is in correction territory, but not quite a crash. A few more months at this rate might be enough to push it into that region.
Canadian real estate prices continued to move lower last month, as widely expected. While prices have come down significantly, the surge they made still placed a typical home out of reach for most households. That might not change in the near term.
BMO recently warned that weak real estate demand will persist until rates fall much further. If demand remains weak, it will likely continue to apply downward pressure for the time being.
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