Canadian home price growth continues to accelerate despite further demand erosion. Canadian Real Estate Association (CREA) data shows home prices jumped in February. The increase was accompanied by sales making the sharpest drop in years—easing inventory pressures even further. That’s not how this traditionally works.
Canadian Real Estate Prices Made Sizable Gains Last Month
The composite benchmark price of existing home sales made through the MLS.
Source: CREA; Better Dwelling.
Canadian existing home prices continued their march upward last month. The price of a benchmark (or typical) home climbed 0.6% (+$4,400) to $713,700 in February. Home prices are 1.0% (-$6,900) lower than last year, but change may be on the horizon.
Canadian Home Price Growth Shows Recent Acceleration
The 3-month (annualized) and 12-month change in price for a typical home according to the CREA composite benchmark.
Source: CREA; Better Dwelling.
Annual growth moved deeper into loss territory, but it was due to a shifting 12-month window. The downward pressure this time last year has begun to roll off, obfuscating the recent acceleration. More recent data shows short-term acceleration, with the 3-month (annualized) rate rising significantly higher than the annual rate. It also happens to be much higher than it was this time last year—when there were no tariff threats, higher population growth, and even more sales.
Since short-term acceleration precedes rising annual growth, it indicates rising upward pressure. A bit perplexing against a backdrop of eroding fundamental demand.
Canadian Home Sales Make Sharpest Drop In Years, Inventory Resilient
Canadian real estate demand continues to fade. CREA specifically notes that seasonally adjusted sales made a monthly drop of 9.8% in February, and it was the sharpest drop since May 2022—back when rate hikes first began. The industry professional group attributed this to “tariff uncertainty,” but it’s worth recalling this uncertainty pushed prices higher.
Unadjusted annual growth in February (-10.4%) shows home sales slowing at a rate similar to pre-trade war announcement. Buyers in the market also paid more, most likely believing that falling rates would push home prices higher in March. There’s a little more to the issue than just tariff-driven uncertainty.
Markets don’t typically see higher prices, weaker sales, and loftier inventory levels. The industry attributed the odd combination to tariff uncertainty, but higher prices indicate this more closely resembles rising exuberance.
Many consumers expected this month’s recent rate cut. Falling rates, while typically a sign of a weak economy, seem to signal speculative growth after the pandemic’s low rate shock. Those expecting cheaper credit to spark a demand surge will be disappointed. The last cut stimulated inflation expectations, increasing mortgage interest costs.