And the utter craziness has begun to “decelerate” in some markets.
By Wolf Richter for WOLF STREET.
At least the Bank of Canada is officially acknowledging the craziness of the Canadian housing market, which has been deemed to be the second biggest housing bubble in the world, behind New Zealand, whose central bank also officially acknowledged its housing bubble, and stopped QE cold turkey, unlike the Fed, which has refused to officially acknowledge anything.
Starting last October, the Bank of Canada began the process of ending its asset purchases. Since then, it stopped buying mortgage-backed securities, unwound its holdings of repos and Treasury bills, and cut the amount of its weekly purchases of Government of Canada bonds for the third time, from C$5 billion per week last year to C$2 billion per week now. The assets on its balance sheet dropped from C$575 billion in March to C$487 billion as of last week. And in its pronouncements, the housing bubble looms large.
Housing markets react slowly, spread over years, and Canada’s housing market has started to react just a teeny-weeny bit. Home sales in June dropped by 8.4% from May, the third month in a row of declines, and inventory increased to 2.3 months’ supply, up from 2.1 months. And in a few markets, such as Greater Toronto, the historic price spikes have started to “decelerate,” as it’s now called, on a month-to-month basis, but they’re still crazy.
In Greater Vancouver, house prices jumped by 2.7% in June from May and are up 14.7% year-over-year, according to the Teranet-National Bank House Price Index today. Note how the Bank of Canada’s radical monetary policies starting in March 2020 turned around Vancouver’s housing bust that had already been under way for a couple of years:
The Teranet-National Bank House Price Index tracks prices of single-family houses through “sales pairs,” similar to the Case-Shiller Home Price Index in the US, comparing the price of a house that sold in the current month to the price of the same house when it sold previously. Since it tracks how many more Canadian dollars it takes to buy the same house over time, it is a measure of house price inflation.
In the Greater Toronto Area, the house price spike “decelerated”: In June, the index jumped by 2.7% from May, but that crazy increase (annualized 32%!) was the slowest increase since March. Year-over-year, the index jumped by 15.9%. Note the decline in house prices in 2017, and the wavering that followed, until the BoC opened its vault:
All charts here are on the same scale as the chart for Vancouver, with more white space appearing at the top as we go down the list, indicating the slower price increases over the past 20 years, compared to Vancouver.
In Hamilton, Ontario, house prices spiked by 3.8% in June from May, and by a mind-boggling 28.0% year-over-year, thank you…
Read More: The Most Splendid Housing Bubbles in Canada: Why the Bank of Canada is