Home prices dropped at recession-like pace last month

Canadian home prices declined in February, with a key measure posting the largest drop for the month outside of a recession.

The only time there was a larger pullback in the Teranet-National Bank National Composite House Price Index’s 19-year history was during the recession, in February 2009.

It declined 0.4% in February to a reading of 223.00, 1.87% below February 2018 and 1.43% below its September 2018 peak.

There was decline for 9 of the 11 metro areas in the composite index, which ranks home prices by percentage movement relative to a base value of 100 set in June 2005.

Victoria (−2.0%), Hamilton (−1.4%), Quebec City (−1.2%), Calgary (−0.8%), Vancouver (−0.7%), Ottawa-Gatineau (−0.7%), Winnipeg (−0.4%), Toronto (−0.2%) and Edmonton (−0.1%) all declined.

Bucking the trend were Montreal (0.4%) and Halifax (0.3%) with increases month-over-month.

And among the 14 other metropolitan areas for which there is an HPI, only London and Windsor posted monthly gains.

Retreat not collapse
While interest rates and mortgage stress tests are taking their toll on home prices, the decline in the index does not mean a collapse in prices.

In Toronto for example, apartment prices have been up for 16 consecutive months, while prices of other types of dwellings declined only 1.2% over the last 6 months.

And in Vancouver, where employment was up 3.1% on a y/y basis in February, seasonally adjusted home sales stabilized in the beginning of the year, limiting the potential of further home price declines.

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