Canadian home prices declined for a second consecutive month in May as rising interest rates
cool off the housing market nationwide.
Canada’s benchmark home price fell 0.8% to $822,900 in May from April, according to the
Canadian Real Estate Association (CREA). Cities in Ontario, including Toronto, saw the biggest
monthly decline in home prices.
The price decline comes with a sharp drop in the number of home sales across Canada.
National home sales in May fell 8.6% from the previous month, CREA said.
The reversal comes after Canadian home prices rose more than 50% over a two-year period as
record low interest rates and pandemic fueled demand for larger living spaces led to record
home prices.
But now, as the Bank of Canada tries to reign in inflation that’s running at nearly 7%, mortgage
rates are rising quickly and leading many people to reconsider a home purchase.
The Bank of Canada has raised its trendsetting interest rate from 0.25% to 1.50% since the start
of March, while signaling even more aggressive increases could be coming.
The slowdown in housing has brought the Canadian market back to more historic levels. The
drop in sales in May brought the total number close to the 10-year average for the month of
May.
Canada had just 2.7 months of housing inventory available on the market at the end of May,
about half the longer-term average, CREA said.
