Canada’s Greatest Housing Bubble, November News: Fastest 5-Month Decline on Record

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dated: 2022-11-20 12:17:38 .

Down faster during a bust than up during a bubble: a peculiarity in some cities. Obscure humor makes its way through the charts.

By Wolf Richter for WOLF STREET.

Teranet National Bank’s full 11-city home price index fell 0.8% in October from September and was down 7.7% from its peak in May, the biggest five-month decline in the data’s history ending in 1997. It broke the annual gain to 4.9% from a range of 19% in March and April.

Nine of the 11 cities in the index posted month-on-month declines in October, capped by a 5.7% drop in Halifax. In Hamilton, after a slight increase from the peak in May, prices fell 15.9% and are now about the same year-on-year. Only two cities in the index recorded monthly gains: the oil cities of Calgary and Edmonton, whose real estate markets have been dormant for 15 years.

Hamiltonwhere prices move in tandem with Toronto, it became no. 1 best housing bubble ever in Canada according to the Teranet-National Bank Home Price Index, after surpassing Toronto and Vancouver in 2021.

And now it’s #1 in terms of percentage decline from peak. In October: -2.9% for the month, -15.9% from the peak in May; roughly flat from year to year.

Falling faster than rising: The index fell faster in the first five months of the crash (-69 points) than it rose in the last five months of the bubble (+65 points).

There is a vague sense of humor about such ridiculous price peaks, which then relaxes again. These things make you wonder how the human brain works:

Halifax is number 2 in terms of falling from the top. In October: -5.7% for the month; -14.0% from peak in June pushing annual profit to +6.7% compared to over 35% in early 2022.

Again, the index fell faster in the first four months of the bust (-41 points) than in the last four months of the bubble (+31 points).

This chart proves once and for all that central bank rate cuts and QE – the whole era of free money – spawned a virus that turned the human brain to mush, a phenomenon I previously noted in my Imploded Stocks. And then, when the central banks end the era of free money, the brain starts to heal and see what happens.

Greater Toronto area is number 3 in terms of falling from the top. In October: -0.9% for the month, -11.9% from the peak in May, reducing the annual gain to 3.6%.

The index fell almost as fast in the first five months of the bust as it did in the last five months of the bubble:

Victoria is #4 in terms of falling from the top. In October: -1.2% per month; -10.4% compared to the peak in May, pulling the growth for the whole year down to 2.1%.

The index fell faster in the first five months of the collapse (-32 points) than it rose in the last five months of the bubble (+24%):

Canadian home prices have responded more quickly to rising interest rates than US home prices – although they are responding now as well – mainly because in Canada most mortgages are either variable rate with all kinds of hedges or fixed rate for maturities like 2 to 5 years . When interest rates started to rise, existence Homeowners faced the prospect of higher mortgage payments in the future. This is in addition to potential home buyers looking for mortgage payments at these rates and prices that they cannot afford.

The methodology of the Teranet-National Bank Real Estate Price Index is based on “repeat sales,” which tracks the price of the same home on each sale over time. Unlike average prices, the “repeat sales” method is not affected by a change in the mix of homes being sold. The index is set to 100 for all cities in June 2005. All my charts here are on the same scale.

Ottawa is number 5 in terms of falling from the top. In October: -1.8% for the month; -9.6% compared to the peak in June, pulling the full-year gain to 2.8%. The index is now below its first reading in July 2021.

Greater Vancouver is #6 in terms of falling off the top. In October: -0.1% for the month; -7.9% compared to the peak in April, which reduced the annual gain to 3.7%.

Winnipeg is #7 in terms of falling off the top. In October: -3.1% for the month; -7.5% compared to the peak in June, pulling the full-year gain to 3.9%.

Falling faster than growing: The index fell faster in the first four months of the downturn (-21 points) than it rose in the last four months of the bubble (+19 points).

Montreal, in October: -1.5% for the month; -6.4% compared to the peak in June, which reduced the annual gain to 8.4%:

Quebec, in October: -1.2% for the month; -3.6% compared to the peak in July, which reduced the annual gain to 8.6%:

Oil cities are still an exception.

In Calgary, Canada’s oil capital, in October: +2.0% for the month to a new record; +16.2% on an annual basis. Prices were roughly unchanged from mid-2007 to mid-2020:

in Edmonton, also in the Canadian oil field, in October: +2.1% for the month to a new record; +7.5% on an annual basis. The index is now just a hair above where it was in mid-2007:

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Canada’s Greatest Housing Bubble, November News: Fastest 5-Month Decline on Record

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Source https://canadatoday.news/ca/the-most-magnificent-housing-bubbles-in-canada-november-update-fastest-5-month-plunge-on-record-155327/

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