Prior to October, Alberta and British Columbia were the only Canadian provinces with slumping home resale market prices. Ontario joined the club in October, posting a 10.6% year-over-year price decrease. In fact, October is the first month in which the drop in the national average home price reflects the evolution of regional prices.

In previous months, the decline in the national average price was attributable primarily to lower sales in British Columbia, where homes are the most expensive in the land. Quebec, New Brunswick and Prince Edward Island teetered on the cusp between a balanced market and a buyer’s market in October. In the other provinces, the market remained healthy or at least showed no sign of an imminent downturn in prices.

In October, for the first time since mid-1996, an indicator - the ratio of new listings to sales - signalled that the Canadian home resale market had become a buyer’s market. Depending on its level, this ratio corresponds to different market conditions. Based on experience, when it stands below 1.7, the ratio indicates a seller’s market in which prices rise sharply. From 1.7 to 2.1, the market is balanced and prices increase slightly above or at par with the inflation rate. Above 2.1, the market favours buyers, as a surplus of homes for sale slows price growth below the inflation rate or causes it to retreat.

With all of this said, the risk of a home price deflation in Canada, when measured properly, similar to the one witnessed in the United States is low. This bodes well for Canadian homeowners.

Mounir R. El-Ayari, CIM, FCSI, C.h. P. Strategic Wealth
Investment Advisor
Associate Portfolio Manager
e-mail: mounir.el-ayari@nbf.ca