Canada’s housing market correction ended the year with the first year-over-year decline for quarterly home prices in more than a decade, according to a new report from Royal LePage.
But the brokerage is also arguing in a report released Friday that “headline-grabbing” downturns through 2022 have been, in some regards, overblown.
Royal LePage’s latest national housing report showed the aggregate price of a home in the fourth quarter of 2022 was $757,100, down 2.8 per cent compared with the same months a year earlier.
That marks the first year-over-year decline in home prices for any quarter since 2008, according to the brokerage, when the housing market in Canada faced a steep downturn during the global financial crisis.
Declines were even steeper in some Canadian markets, the report showed.
In the Greater Toronto Area, the aggregate price of a home in Q4 was $1,068,500, down 4.6 per cent annually. The Greater Vancouver Area, meanwhile, saw prices decline 3.5 per cent year over year to $1,208,900.
Some markets, including Calgary and Montreal, saw modest price growth in the fourth quarter.
Single-family homes saw price declines of 3.7 per cent in the quarter, while condo prices were down 1.4 per cent annually.
On a quarter-to-quarter basis, Royal LePage said the national aggregate home price continued to decline for a third consecutive time, but the 2.3 per cent dip in Q4 was the smallest yet.
Since March 2022, rising interest rates from the Bank of Canada have rapidly cooled housing markets across the country after a flurry of activity during the COVID-19 pandemic.
The most recent data from the Canadian Real Estate Association (CREA) shows that the average, non-seasonally adjusted price of a home has declined 19 per cent since its peak in February 2022.
But Royal LePage also sought to put some of the price declines in a wider context.
The brokerage notes that 0.68 per cent of all homes in Canada were sold during the high point for prices in February and March — limiting the actual exposure most homeowners would have had to the peak.
Royal LePage also says the market peaked for some Canadian cities and property types at different times in 2022, with the high mark for condos coming “much later in the year.”
The brokerage also put the “modest” fourth-quarter decline in perspective by noting that prices in Q4 2021 were “close to their peak”; aggregate prices also remain above pre-pandemic levels for the fourth quarter.
“It may be headline-grabbing to say that prices are down by double digits, yet well less than one per cent of property owners completed their purchases in February or March of last year, when the pandemic-driven urgency to buy and serious housing supply shortages came together to create a final spike in prices,” Royal LePage CEO Phil Soper said in a release accompanying the report.
Royal LePage said in a separate report late last year that it expects home prices to decline modestly by a further one per cent in 2023.
Other market watchers, including economists at TD Bank and RBC, have called for home prices to bottom out sometime in early 2023.
Soper said he expects activity to pick up again once interest rates stabilize and buyers return to the market, given continued demand from Canada’s growing population and the ongoing “widespread shortage of homes.”
Before long, he expects home prices to reverse their 2022 declines as those who put off plans to buy and new entrants to the market drive up value.
“Many sidelined buyers are waiting patiently for the bottom to be revealed. Once interest rates stabilize and consumers adapt to their new normal, many of today’s sidelined buyers will be back – sooner than many analysts are predicting,” Soper said.
“While we do not expect the same level of frenzied demand seen at the height of the pandemic, new household formation created by millennials and older gen-Zers, as well as hundreds of thousands of newcomers, will put price pressure on our limited supply of available homes.”