Monday Market Minute | Mar 21, 2022
Canadian housing sales begin declining in March 2022 as the first BoC rate hike signals the end of the pandemic housing boom.
What Moved
CREA's February data showed the first signs of cooling in the Canadian housing market, with sales volumes declining in Toronto and Vancouver — the two most overheated markets. The average national home price had peaked near $816,000, but weekly mortgage application data pointed to a sharp pullback. The BoC's first hike was just weeks old, yet the mere signal of a sustained tightening cycle was enough to shift buyer psychology from FOMO to caution.
Why It Matters
The housing inflection marked a critical juncture for private markets participants with real estate exposure. Mortgage investment corporations faced a double shift: higher rates improved yield on new originations, but rising rates also reduced refinancing activity and increased borrower stress on existing books. Private real estate funds needed to reassess underwriting assumptions built on 2021's frothy pricing, particularly for pre-construction and land development plays.
Signal to Watch
Toronto Regional Real Estate Board's monthly data — the GTA market typically led national trends, and a sustained sales decline would confirm the correction thesis.