Average Canadian house price hits $816,720 — up 20% in past year

The price of the average Canadian home hit $816,720 in February, its highest level on record, according to the Canadian Real Estate Association.

The group, which represents 100,000 realtors across the country, said Tuesday that it was the second-busiest February ever for home selling, just behind the all-time high hit last year.

Some 58,209 homes changed hands during the month, and a surge in new listings in the latter half of the month suggests that momentum may carry over into strong sales in March, too.

The $816,720 average selling price is an increase of 20 per cent compared to last year's level. 

CREA says the average selling price can be misleading since it is skewed by sales in big expensive markets like Toronto and Vancouver. Simply removing those two cities from the numbers shaves more than $178,000 off the average, the realtor group notes, which is why it tabulates a second number, known as the House Price Index, to adjust for the volume and type of housing being sold.

But that metric is also going up at its fastest pace on record, up 29 per cent since last year. It increased at 3.5 per cent in the month of February alone — also the biggest monthly jump on record.

The pandemic has had a counterintuitive impact on Canada's housing market. In March and April of 2020, sales volumes and price growth slowed to a crawl as buyers reacted to the uncertainty by keeping their wallets closed. But in the almost two years since, the market has been on an absolute tear, with record-low borrowing costs — which were kept in place to stimulate the economy through the pandemic — fuelling a thus far insatiable demand for housing.

If low rates are the main factor powering prices higher, the market could be in for a rude awakening as the Bank of Canada this month raised its benchmark interest rate for the first time in two years. Economists say there could be as much as another half-dozen rate hikes to come this year, which would take the central bank's rate up to two per cent.

That's why "the next few months could be telling," Bank of Montreal economist Robert Kavcic said. "Demand has been boosted by expectations of rising prices and a last-ditch effort to lock in cycle-low mortgage rates," he said. "But sentiment can change in a hurry, and this market could find balance very quickly the moment that it senses softer prices."