The average price for a home in Canada slipped 1.9 percent last month compared to December, running the string of declines to 11 consecutive months and dropping the average by 15 percent compared to January 2022.

The average home price fell to C$714,700 or about $532,000 in U.S. dollars.

Prices could plunge another 16 percent by July, according to a new study by Oxford Economics.

The number of homes sold in January was down 3 percent from December; new listings rose 3.3 percent. The number of homes coming onto the market last month was the smallest in any January since 2000, Bloomberg said.

About 4.3 months’ worth of homes are now for sale, about a month less than the long-term average, the Canadian Real Estate Association reported.

In January, the Royal Bank of Canada raised its interest rate again, pegging it at 4.5 percent. The rate had been 0.25 percent last March, which had helped fuel one of the most intense home-buying frenzies in the West through much of 2021 and 2022.

The spate of rate hikes has been among the steepest in Canada’s history. The bank now says it is likely to pause before making further increases to see how the economy accustoms itself to the new rates.

“Hope springs eternal that housing activity may be close to a bottom, but we suspect the market is still digesting the incredibly aggressive rate hikes of the past year,” Douglas Porter, chief economist at the Bank of Montreal, told Bloomberg.

“We look for further price softness in the months ahead,” he said.

“Softness” may be a mild term. In the worst-case scenario, prices could fall another 33 percent from where they are now, the Oxford analysis says.

In the best outcome, inflation slows, supply chains untangle, and prices shed 27 percent from their peak a year ago.

“We see a moderate downturn being possible, with defaults and insolvencies rising a little, but not drastically,” Tony Stillo, Oxford’s chief Canada economist, told the Toronto Star.

In contrast, a recession, with a wave of layoffs and a jump in defaults, could sink prices 48 percent from peak to trough—a “highly unlikely” outcome, Stillo added.

Canada’s labor market remains strong, with unemployment at 5 percent, compared to a long-term average greater than 8 percent.

The Royal Bank of Canada predicted earlier that home prices would fall only 14 percent from last year’s peak, which would mean that they will not fall further from this point forward—an outcome that now seems unlikely, given current trends in pricing and purchasing.

Home purchases have made up a whopping 14 percent of the growth of Canada’s GDP in the recent past.

However, investments in homes have dropped 13 percent since last March and will slump an additional 19 percent by 1 July in Oxford’s most likely outcome.

TREND FORECAST: Considering home prices rose some 50 percent since the COVID War was launched in 2020, while there will be a correction in housing prices, as with our forecast in the U.S., minus a wild card, home prices will not fall below pre-COVID levels.