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Interest rates are finally paused. Will home prices keep falling?

After declining for much of last year, Canadian home prices are showing signs of stabilizing in some areas. Let's compare to past years and see where they may go from here.

Add (a home) to cart? How to decide if the timing's right.

It's been a wild ride for housing markets in the last year — rapidly higher mortgage rates brought prices down in many regions, but also discouraged many buyers and sellers from doing their housing thing in the normal course.

Canada hit an all-time peak for home prices in March 2022, up roughly 45% compared to pre-pandemic levels. Fast forward to February 2023, and average home prices have come down over 16% from peak.

So, yes, prices are down this year, but they were expected to normalize after very abnormal market conditions. It also doesn't mean they'll keep falling, especially if interest rates look to decline in the future which will entice those waiting on the sidelines to come back to market.

Here's a deeper look at how Canadian home prices are doing across our nation to help your home-buying decision.

Have home prices fallen since last year?

In March 2022, the Bank of Canada started hiking interest rates at the fastest pace in its history, which has had the desired effect to calm a very heated housing market.

The composite average MLS® HPI (Home Price Index) for Canada, not seasonally adjusted, shows that home prices have declined about 16% since a national price peak last March.

  • From a March 2022 peak of $861,000
  • To $715,400 in February 2023 (16.9% decline)

However, this national decline doesn't tell the whole story. According to the graphic below which uses a Feb 22 to Feb 23 comparison, the provinces that lead the pack in price declines year over year are Ontario (-24%), Manitoba (-12.2), and British Columbia (-11.8%).

But other regions have seen less in downward price adjustments, or even slight price increases, such as most Atlantic provinces (for an average of +3.7%), the N.W. Territories (+1.3%) and Saskatchewan (+0.4%).

Now let's see how home prices compare over the long term.

FEB23 Average home prices across Canada

How do Canadian home prices compare over time?

The national composite average MLS® HPI from February 2022 ($849,300) to February 2023 ($715,400) has decreased by $133,900 (-15.8%).

Using February 2023 numbers, this provincial map graphic compares home prices going back 1 year (2022), then 3 years (2020), and 5 years (2018).

Falling from the peak was inevitable. But if you compare February 2023 prices to 5 years ago, most provinces register substantial gains from 2018.

Hey, PEI! Prince Edward Island has seen home prices increase 81.3% from 2018. The Atlantic Provinces are the star of home value gains in the last 5 years.

These numbers show that if we take a moment to assess the housing market and home affordability, higher interest rates haven't yet made a major dent in Canadian home values measured over the long term.

Which areas have declined in the last year?

For the latest numbers (updated monthly) check out the interactive CREA map below (Canadian Real Estate Association), which uses either the MLS® HPI or the National Average Home Price. It shows the price-percentage changes (year-over-year) by province. The drop-down lets you look at more specific areas, such as Greater Toronto.

Taking a snapshot of February 2023 year-over-year, provinces that had an area decline the most are Saskatchewan (Lloydminster -29.4%), Ontario (Durham Region -27.7%) and British Columbia (Chilliwack -24.7%).

The Greater Toronto Area (GTA) has seen home prices decline by 17.7%, and Greater Vancouver Area has seen a decline of 9.2% from February 2022.

Which areas show price increases?

In February 2023, some regions posted price increases compared to last year, likely due to reduced listings (more competition can hike prices) and more interest and influx from Canadians looking for better value for their mortgage bucks.

Provinces that had an area increase the most since last February are New Brunswick (Yarmouth +12.1%), Quebec (Saguenay +8.6%) and Saskatchewan (Prince Albert +5.3%).

Calgary, Alberta had seen home prices increase by 1.8% since last February.

Note: Even though the composite MLS® HPI tends to be a closer measure than the 'home price average' of a particular area, not all areas report the HPI.

Get the latest home price stats from CREA

Comparing current home prices to past years can give you a sense of how home prices are doing overall, despite fluctuations during a year. To see the latest Canadian national home price and sales numbers, visit CREA's Monthly Stats page.

Will home prices stabilize?

National home-sale activity in February 2023 year over year was down by 40% (ouch). But, national home sales actually rose 2.3% month-over-month, indicating some signs of market life. Canada’s MLS® HPI Composite Benchmark Price, which measures the price of a 'typical' Canadian home, increased by 0.2% month-over-month (to $715,400) — the first since an increase has been posted since peak activity last March 2022.

But where have all the sellers gone? With increasing immigration numbers coming in, and buyers who were waiting on the sidelines looking to go shopping again (now that rate hikes have been paused), experts are wondering if we'll see listings increase to help meet the extra demand. Many sellers may be waiting for more attractive price points after a year of declines (in most Canadian regions). So an increase in buyers and a lack of listings could prevent prices from eroding too much further.

Another scenario could play out — where both buyers and sellers come back for a balanced market, with healthy competition keeping prices more stable.

Did you know? In the first quarter of 2023, Canada's population grew by 204K (Globe and Mail, Apr. 6, 2023) — by far the largest quarterly increase on record. Will increased immigration targets bring more housing competition to put a floor under falling prices?

Will waiting for lower mortgage rates help you buy?

Several Canadian experts (and economic numbers) warn of a possible recession starting in 2023. If a recession does take hold or inflation comes down enough, the central bank will be forced to reduce rates at some point, maybe even later this year.

Lower mortgage rates would help improve mortgage payment affordability and even lender qualification. However, the longer buyers wait for lower interest rates — the more may flood into the market to increase demand again. If there's a listing or housing shortage, prices could be pushed higher, negating any affordability advantages they were hoping to snag.

As well, lenders may be implementing stricter mortgage qualification requirements later this year, which may interfere with the positives of lower mortgage rates (for example, if the federal mortgage stress test is made harder).

A (suit) case of waiting too long? Recessionary conditions (if they happen) may negatively impact salaries and job security to reduce home affordability, despite the potential for lower mortgage rates. But if you feel that you can't afford a home until rates drop, you can still plan (with us!) and be ready to shop when the time is right.

Where are mortgage rates headed? Read our 2023 Mortgage Rate Forecast to get the lowdown on what's happening in the economy and when the rate cuts might start.

Time to shop the (home) aisles? Our experts can help you decide.

Spring is typically a busy time in the Canadian housing market. Warmer weather beckons potential home buyers to walk the (housing) aisles in search of a dwelling update.

Currently, at the very least, home prices and sales have tempered, shifting to a more balanced market in most Canadian regions. This shift gives buyers some negotiating room again, like being able to add conditions to purchase offers (that hopefully includes a professional home inspection to protect your buying interests).

At True North Mortgage, we know that every homebuyer's situation is different. The best thing you can do is assess your current mortgage approval status to understand what you can afford, how much down payment you may need, how your debt affects your approval, and what to look for in the market for your chance to jump in. Looking for a realtor? We can provide a referral based on long-standing relationships within our industry.

What can truly help your home affordability? Your best-possible rate, flexible mortgage options, and saving-savvy experts who can help you with the right mortgage strategy. Unified and salaried, you'll get free, unbiased advice to help you save thousands when you buy a home.

Get sound mortgage advice to know when to shop for a home. Anywhere you are in Canada, our highly trained experts make the difference — including your best rate and mortgage to help you save thousands.

Be prepared when it's your time to buy. Talk or apply with us today.