Canadian home prices post record drop as high rates hit buyers

(Bloomberg) — Canadian home prices posted a record decline in 2022 as rapidly rising interest rates forced a market adjustment that may have further to go. 

The country’s benchmark home price fell 1.6% in December to C$730,600, bringing the total decrease since February’s peak to 13.2%, the Canadian Real Estate Association said Monday. It was the biggest peak-to-trough falloff since the group started compiling the data in 2005, while 2022 also saw the biggest price decline for a calendar year since records began, with a 7.5% drop between this December and last.

With the economy in danger of entering a recession, and the Bank of Canada warning of more rate hikes to counter persistent inflation, the housing market may face continued pressure in the coming months. A record number of buyers used floating-rate debt for purchases during the pandemic boom, and those borrowers may come under increasing strain if mortgage costs remain high. Job losses from an economic slowdown also would make it harder for people to keep up with loan payments and stay in their homes.