Canada home prices fall deeper into correction

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Canadian home prices fell for a ninth straight month as sharply rising interest rates prompted both buyers and sellers to withdraw from the market heading into the traditionally slower winter season.

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The benchmark price for a home fell 1.4 per cent on a seasonally-adjusted basis to $744,000 in November, the Canadian Real Estate Association said Thursday. That brings the cumulative price drop from February’s peak to 11.5 per cent.

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The number of transactions nationwide fell 3.3 per cent, outpacing the decline in new listings, which were down 1.3 per cent from the month before, according to the data.

The Bank of Canada has raised its benchmark overnight rate to 4.25 per cent this year from 0.25 per cent in March, a rapid rise in borrowing costs that has left many prospective buyers priced out of the market. With many sellers also waiting for a more opportune time to list, the market seems to be going into a deep freeze during Canada’s winter months.

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Still, supply remains tight. The number of new listings in November was the second lowest for that month in 17 years. The number of months of inventory up for sale nationwide, meanwhile, stood at 4.2, a full month below its long-term average.

Economists are now predicting Canada will enter a shallow recession the first half of next year, even as the central bank says rates may need to rise even further to tame inflation. So whether more buyers or sellers emerge as the weather warms into the spring selling season will likely depend on how the economy develops between now and then.

“November’s housing data from across Canada came in as expected — still pretty quiet — and that is unlikely to improve this winter with the Bank of Canada raising rates again last week,” Shaun Cathcart, the real estate board’s senior economist, said in a press release accompanying the data. “It will be interesting to see what buyers do when listings start to come out in big numbers in the spring.”

In a separate release Thursday, the Canada Mortgage & Housing Corp. said builders started work on an annualized 264,159 units in November. Total housing starts remain elevated compared to historical levels, pushed higher by multi-family construction.

With assistance from Erik Hertzberg.

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