If you have followed the housing market in Canada over the past year, you undoubtedly heard mention of the decline in housing prices. In fact, this has been the steepest decline in Canadian home prices since 1995. While this may seem like an alarming fact at first, it is actually not as doom and gloom as it may appear for sellers and real estate investors alike.
Canadian Home Price Statistics from the Canadian Real Estate Association
The Canadian Real Estate Association (CREA) released a statistic last month that the average home price in Canada dropped almost 4.9 percent in comparison to home values in December 2017. They estimate that the average home price in Canada is holding at about $472,000 for the time being. For the year overall, there was about a 4.1 percent dip in Canadian home values in comparison to all of 2017. This is the statistic that confirms the steepest average yearly home value drop in the last 23 years.
How Averages Can Be Deceiving in Canadian Real Estate Valuations
Without breaking these numbers down further, it can seem like a bad time to put your house on the market for any Canadian real estate owner. However, the averages can be a bit deceiving as this breakdown will illuminate.
Factoring the Value of Homes that Were Actually Listed for Sale
One of the first factors to consider in figuring out why home values may be showing as declining fairly rapidly is which houses were actually listed for sale and which ones sold. For example, if the majority of homes listed for sale in a given area happened to be less expensive homes than average, then this could cause the overall average home prices to decline significantly. Note that this does not necessarily mean that the actual value of any of the homes in that area decreased. Even if their values increased or stayed the same, there could still be an overall decline in home prices if the homes that appreciated were not the ones that were listed for sale or sold.
Home Price Drops in Certain Locations May Skew the Average Home Prices
There are many variations in home prices across the country, which must be taken into account when looking at overall Canadian real estate market trends. For instance, the Toronto and Vancouver markets have remained a mainstay for high-volume real estate transactions in Canada. The dip in home prices in those markets could skew the national average because more homes tend to be bought and sold in those areas at a faster pace. This certainly does not mean that prices for homes in other areas dropped in a commensurate fashion.
When the home prices for Toronto and Vancouver are excluded from the national average calculation, an additional $100,000 is added back into the national home price average. This is a significant boost, although it is not enough to completely surmount the overall decline in home prices throughout the country.
Key Takeaways from the 2018 Statistics on Canadian Home Prices
After taking a closer look at the reason behind the national trend, you should feel slightly more optimistic about the state of home prices in Canada. Even though there is some room for tempering these numbers, the fact still remains that home prices have declined overall. Buyers can certainly take advantage of the current trend, but it would be a mistake to expect rock-bottom home prices when shopping the market. Conversely, sellers can be optimistic that the trends are not as bad as they first appear.