Blogs & Comment

House prices now declining

Year-over-year increases in house prices continue to decelerate in Canada, from 10% in March to -0.6% in December. This is the first month since the 1990s where the change at the national levelwas negative. Leading the slide were Calgary house prices (-7.6%), followed by Vancouver (-1.5%), and Toronto (-0.6%). The other three cities in the index remain in positive territory: Montreal (5.4%), Halifax (4.6%), and Ottawa (4.2%).
The readings come from a new index of resale-house price changes, the TeranetNational Bank National Composite House Price Index. It is considered a less biased measure than currently used measures becauseits repeat-sale methodology controls for changes in the mix of houses over time.
An analysis by Worthwhile Canadian Initiativeblog may be of interest to those concerned about a U.S.-style meltdown in Canada. The first chart below compares U.S. and Canadian house price trends (measured by the repeat-sale methodology). It shows a less extreme rise for Canada and so far, much less of a correction. The second chart shows the ratio of house prices to gross national income, which reveals Canadian house prices shot up a lot less than U.S. house prices relative to incomes. Thus, the correction in Canada is likely to bemuch milder.