The spring selling season is now in full swing in Canada. Sales of all types of homes rose by 1.4% in March from February, after the 1.4% increase in February from January, so on a year-over-year basis, sales plunged by only 34% from a year ago, the smallest decline since September.
And the Canada Home Price Benchmark Index for single family houses jumped by 2.0% in March from February, as it should during spring selling season. For example, in March 2017, it jumped 3.7%; and in March 2016, it jumped by 2.6%. There were Marches when it rose less, but it tends to rise sharply in March. And so, compared to March last year, which was the peak, prices were down 17.5%, the second-worst decline in the history of the data going back to 2005, behind only February’s drop.
In dollar terms, the Single-Family Home Price Index for Canada rose by $15,400 in March from February, to $796,700, back where it had been in November. But year-over-year was still down by $169,500 (all prices are in Canadian dollars). Canada’s housing market didn’t reset during the Financial Crisis – unlike the US housing market – and after a small dip just kept ballooning.
The BoC’s has hiked its overnight rate by 425 basis points to 4.50%, and has indicated that there would be no rate cuts this year. Mortgage rates have risen across the board. And QT – quantitative tightening, the opposite of QE – is progressing just fine. Since peak-balance-sheet, total assets have now dropped by 34% to $382 billion.
Canada’s housing market reacts very quickly to changes in interest rates. The typical US mortgage of 30 years with a fixed interest rate and a fixed payment for 30 years doesn’t really exist in Canada, where mortgages are typically variable-rate or fixed-rate for short periods, such as five years. Many current homeowners, even those who don’t want to sell or buy, are soon feeling the pressure of higher mortgage rates. For a look at the complexities of the Canadian mortgage market, see our Introduction to Canadian Mortgages and Mortgage Insurance. The MLS Home Price Index for single-family houses jumped by 2.8%, in March from February, to $1.33 million.