Monday Market Minute | Nov 7, 2022

Canadian housing correction may be finding a floor as sales stabilize at lower levels

What Moved

CREA data for October showed Canadian home sales stabilizing, albeit at levels well below the 2021-2022 peak. National average prices had declined approximately 12-15% from the February high, with the steepest corrections in suburban markets and the most resilient pricing in urban cores with tight supply. New listings remained subdued as sellers chose to wait rather than accept reduced prices, creating a standoff that limited further downside. The BoC's signal that the hiking cycle was nearing its end provided a tentative confidence boost.

Why It Matters

For private real estate investors, the stabilization was cautiously encouraging but premature to call a bottom. The full impact of the rate hikes — particularly on mortgage renewals — would not be felt until 2023-2024 when millions of Canadian mortgages originated at 2020-2021 lows would reset at dramatically higher rates. MIC and mortgage fund investors needed to look beyond current-quarter performance to the renewal wave ahead, where borrower stress could still intensify.

Signal to Watch

CMHC housing starts data — a sustained decline in new construction would confirm that the correction was reducing future supply, planting the seeds for the next housing cycle.

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