Monday Market Minute | Nov 7, 2022
Canadian housing sales data suggests the correction may be stabilizing as the BoC signals the tightening cycle is nearing its end.
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.