In January 2023, home prices for new homes in Canada dropped by 0.2% month over month. The latest New Housing Index report showed higher mortgage rates, putting downward pressure on the prices of new houses.
January also saw an increase in borrowing costs, bringing the policy interest rate up to 4.5%. The Canada Mortgage and Housing Corporation reported that there were 18.7% more single-family homes completed in December 2022 than in December 2021, of which none were sold.
In addition to that, the costs of softwood lumber decreased in January by 61.2% since they hit a high in March 2022. This has helped reduce construction costs as well. Builders like us had experienced a deteriorating market, and now with the decrease in construction costs, we can pass the savings on to home buyers, hence the decreasing new home prices.
The Canadian Real Estate Association had predicted this decline in housing prices. They predicted an almost 6-percent drop over 2022. This caused both sellers and buyers to sit on the sidelines and watch. So we can likely expect rising interest rates and high levels of uncertainty to be a thing of the past. The CREA also forecasts that average home prices will reach $662,103 this year.
Slowed Growth in New House Prices
CREA also reported that the new listings ratio for resale homes in January 2023 was 57.8 compared to January 2022, when it was 77.9… This indicates a cooling market.
In Calgary, there was a record year-over-year gain on new house prices. Calgary saw a 10.9% increase, Windsor came in with 5.9%, and Quebec followed with 5.3%.
Sales hit a 14-year low in the month of January. The sales volume went to a 14-year low, making January 2023 the second-best January on record. The national average home price in Canada was $612,204, down 18.3% year over year.
British Columbia and Ontario saw steeper price drops, according to CREA.