Monday Market Minute | Aug 8, 2022

Canadian home prices down 10-15% from peak — the correction deepens faster than consensus expected

What Moved

CREA's July data showed the national average home price had fallen to approximately $629,000 — down roughly 15% from the February peak of $816,720. The correction was sharpest in the suburban markets that had benefited most from pandemic-era remote work premiums. Toronto's 905 region, Ottawa, and Hamilton-Burlington saw steeper declines than urban cores. Sales volumes collapsed to multi-year lows as buyers waited on the sidelines and sellers resisted accepting the new price reality.

Why It Matters

The housing correction was now proceeding faster than even bearish forecasts had predicted. For private real estate investors, the speed of the decline raised portfolio valuation concerns: funds with mark-to-market policies would need to recognize impairments, while those using appraisal-based valuations faced a growing gap between book value and market reality. MICs with high loan-to-value ratios on recently originated mortgages found their collateral cushions thinning rapidly.

Signal to Watch

Mortgage renewal data for 2022-2023 — hundreds of thousands of Canadian homeowners would face renewal at dramatically higher rates, creating potential payment shock and default risk.

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