Is the Real Estate Frenzy Finally Slowing Down? Signs are Emerging.


There are signs cropping up that the intense level of housing imbalance seen throughout the pandemic may finally be reaching a turning point.

The latest indication came from Equifax Canada, which reported an annualized 8.1% decline in new mortgage origination volume in the fourth quarter. The total value of those originations was still up a marginal 1.2%, but well off the 27% year-over-year growth seen in Q3.

“There’s no question that sky-rocketing house prices have decreased housing affordability across all segments,” Rebecca Oakes, AVP of Advanced Analytics at Equifax Canada, said in a release. “In addition to high house prices, lenders have also started to move interest rates up in anticipation of rate rises from the Bank of Canada. This could also be limiting the purchasing capacity of many consumers.”

First monthly decline in average new mortgage amount since 2019

The data also showed more tempered growth in the average new mortgage amount, which came in at $354,750 in the quarter.

That was up 10.1% year-over-year, well off the average of 20% annualized growth seen in the past three consecutive quarters, but it marked the first month-over-month slowdown since before the pandemic, Equifax noted.

On a monthly basis, the average new mortgage loan amount was down 1.5%. The drop was slightly more pronounced in the Atlantic provinces: New Brunswick (-2.1%); Newfoundland & Labrador (-2.8%); and Nova Scotia (-3.6%).

“…this may be a sign of average home prices stabilizing,” the report noted. “However, continued demand and lack of supply could lead to further rises in the property prices.”

February home sales data shows a similar trend

Data from some of the country’s local real estate boards showed a notable monthly rise in new listings in major markets.

“One month doesn’t make a trend, but if February is any indication, more sellers may be (finally) making their way into Canada’s housing market,” observed RBC economist Robert Hogue in a recent note.

“This was especially the case in Calgary and Edmonton where a wave of properties put up for sale set the stage for the strongest number of transactions ever recorded in a February,” he added. “Elsewhere, the impact on activity was generally positive albeit more muted. Buyers still face a dearth of supply, maintaining intense upward pressure on prices.”

In the Greater Toronto Area, new listings were down 6.6%, while sales were down 16.8% off their all-time record in 2021.

“We have seen a slight balancing in the market so far this year, with sales dipping more than new listings. However, because inventory remains exceptionally low, it will take some time for the pace of price growth to slow,” noted Jason Mercer, the Chief Market Analyst at the Toronto Regional Real Estate Board.

“Look for a more moderate pace of price growth in the second half of 2022 as higher borrowing costs result in some households putting their home purchase on hold temporarily as they re-situate themselves in the market.”



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