Higher interest rates are responsible for dropping the number of December home sales in Canada by 39 percent, year on year, the Canadian Real Estate Association (CREA) said in a public statement announcing last month’s results.

Also in December, the country’s average home selling price was down 13.2 percent from last February’s peak to C$730,600, CREA data shows, although it remains 33 percent higher than in 2019.

The 2022 price plunge was the largest high-to-low dive since CREA began tracking the data in 2005. 

Also in December, new listings were 6.4 percent fewer than in November as more buyers were locked out of the market and potential sellers decided to sit pat.

The Royal Bank of Canada’s key interest rate was at 0.25 percent in March. It now has reached 4.25 percent, a spike that punctured the nation’s housing economy, CREA said.

Mortgage rates across the country are averaging around 6.5 percent, according to Bloomberg.

During Canada’s recent two-year real estate bonanza, a record number of buyers took advantage of adjustable-rate mortgages. 

“Those borrowers may come under increasing strain if mortgage costs remain high,” Bloomberg cautioned. “Job losses from an economic slowdown also would make it harder for people to keep up with loan payments and stay in their homes.”

Canada is about to enter a recession, economists surveyed by Bloomberg predicted, endangering many of those homeowners who have their mortgage payments rise as their job prospects come into doubt.

“As we look ahead to the crucial spring selling season, we suspect that the market will still be digesting the rapid run-up in interest rates, and that buyers will be more reluctant to re-emerge, keeping prices under pressure for some time yet,” Douglas Porter, the Bank of Montreal’s chief economist, wrote in a recent note to clients. 

Housing affordability for anyone who needs a mortgage has sunk to its worst level on record, according to a December report from the Royal Bank of Canada.

TREND FORECAST: We had long forecast that there was an artificially inflated housing bubble when governments pumped in countless trillions to stimulate failing economies and equity markets to fight the COVID War. And central banks’ record low-interest rates were the key factor in generating the housing boom. Now in Canada, with the cost of servicing a mortgage rising as they are “adjusted” higher, the default rate will increase as more people are put out of work as the recession brings down the economy.