Canada Home Prices See Record Drop as High Rates Hit Buyers

[Fiendish Thingy]

1. This is just the beginning...

Rate hikes usually take 12-18 months to affect the housing market, so this spring will be ground zero.

Sales volume is down from 20-40% depending on the region and category (condos vs. SFD); many high end homes in Vancouver and Toronto have seen price cuts of 20% or more and still aren’t selling. Listings have been scarce because recalcitrant sellers think they can wait out the market, but sales due to death, divorce, downsizing and moves for work will eventually push prices down.

Note to those unfamiliar with Canadian real estate:
the Canadian government insures a good portion of mortgages by first time buyers, which works in sellers’ favour when rates are low, however…the government also requires all buyers to pass a “stress test” showing they can still make payments at rates 2% over prime, which now means buyers have to qualify at 7-7.5%, even though their mortgage is only 5%…