Canadian Contraction

Canadian mortgage rates have risen from 1.5% last fall to 4% now, a 12-year high. This has resulted in April home sales dropping 27% M-o-M and 41.2% Y-o-Y in Toronto. While prices are up 15% Y-o-Y, they are down from March’s Y-o-Y rise of 18.5% and February’s 27% Y-o-Y rise. In Vancouver the story is virtually identical. This suggests that high rates, high prices, and strong demand are eventually incompatible.