Canadian home prices have now fallen 19% from the market peak last February — but they appear to be flattening out

House prices both Canada-wide and in the GTA appear to be flattening out after falling 18.9 per cent nationally from February 2022’s all-time highs, according to statistics released by the Canadian Real Estate Association (CREA) Wednesday.

According to the association’s report, there was a 2.3 per cent rise in home sales from January to February 2023, with the greatest gains recorded in the GTA and Greater Vancouver. Meanwhile, home prices fell 1.1 per cent nationally in February — the smallest monthly drop since March of 2022.

That has some economists feeling that Canada’s real estate market is turning, despite a decline in listings and sales plummeting 40 per cent compared to the same time last year.

“I think one of the mistakes that people might make this year is to focus on some big year-over-year declines,” said Shaun Cathcart, a senior economist for CREA. “That’s really the story about last year, and it’s ancient history at this point — the market really hasn’t done anything too dramatic in the last number of months.”

Instead of focusing on the historic collapse from last year, some economists are watching for “green shoots” — signs that the real estate market has “bottomed out” and is headed for a recovery.

According to Cathcart, February had several. For example, the national increase in home sales in February. “That’s not a huge gain, but it’s the biggest one since sales started to decline in the first place a year ago, when the Bank of Canada started raising rates,” Cathcart said. “That’s a big deal!”

Cathcart also touched on how home prices seemed to be recovering, noting that “that was the smallest decline since home prices started to decline a year ago — so the biggest increase in sales follows a decline in prices.”

Still, worrying signs remain. Homeowners and would-be buyers are under stress after eight interest rate hikes drove up borrowing costs. And part of the reason prices have stabilized is because buyers are chasing a very limited number of listings.

Newly listed properties dropped 7.9 per cent from last month.

“That’s a significant decline,” said John Pasalis, president of real estate brokerage Realosophy. “Fewer people are listing homes and this is really what’s causing the dynamics we’re seeing now.”

Low supply and rising demand have put pressure on house prices, contributing to the levelling out of prices we’re seeing, Pasalis continued. And yet, even though the market is “competitive” right now, real estate is still a “very uncertain market,” at least in Ontario.

“That’s why I’m reluctant to say we’re at the bottom, as it’s still early,” Pasalis said. “We don’t really know how the market’s going to respond.”

In the GTA, home values plunged a record 17.9 per cent in February, compared to the same time last year, according to a recent report from the Toronto Regional Real Estate Board (TRREB). That said, some experts believe things are on the mend.

Jason Mercer, chief market analyst for the board, said CREA’s report lines up with what they’re seeing on the ground.

“We had similar results on a year-over-year basis with sales in the GTA down by about 47 per cent,” Mercer told the Star. “But what’s interesting is when you look on a seasonally adjusted month-over-month basis, we actually saw a pretty marked improvement (in home sales) between February and January.”

Despite listings being down about 21 per cent from January in the GTA, sales in the region are up by around 8.5 per cent, Mercer said.

“Market conditions are starting to tighten up a little bit at least… we are anticipating things to improve as we move through 2023,” he continued.

That said, Mercer is expecting a housing crunch in the near future given the limited supply of homes. “As demand starts to increase, we’re still going to be experiencing a lack of housing in the GTA.”

In addition to new buyers entering the market come summer, Mercer said the region is expecting a “record level of population growth based on immigration in the GTA.”

“All these people are going to require a place to live, and so, looking through to 2023, and even more so to 2024 , we’re going to start to see issues with tighter market conditions.

“There just won’t be the inventory required to account for increasing demand.”

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