Will Home Prices Drop In 2023?

Will Home Prices Drop In 2023?

Written by Mortgage Maestro
Fact-checked by Caitlin Wood
Last Updated January 27, 2023

*This post was created in collaboration with Mortgage Maestro.

Given the rate at which home prices across Canada have soared over recent years, many wonder whether or not we’ll soon be seeing the housing bubble burst any time soon. Over the last year, the housing market seemingly cooled across the country, particularly as interest rates spiked. 

As we enter a new year, where will home prices go? Will home prices bottom out, and when will mortgage rates start to plateau? 

Let’s take a closer look at the real estate market going into 2023, particularly when it comes to home prices.

Will Home Prices Drop In 2023?

According to the latest data from the Canadian Real Estate Association (CREA), the average home price in Canada in December 2022 was $626,318. That’s 12% less than the same month in 2021. In more expensive markets like the Greater Vancouver Area and Greater Toronto Area, the average home prices were $1,114,300 and $1,081,400, respectively, in the same month. 

For the year 2022, the average home price in Canada was $703,875.

When Will House Prices Drop In 2023?

As high as these numbers may be, they’re expected to drop throughout 2023. More specifically, price declines are expected to take place early in the year. Moreover, when prices eventually bottom out sometime in 2023, they’re anticipated to stay at these low levels for months. 

It should also be noted that the extent of any price bottoms will vary from one market to the next and will depend on what the Bank of Canada does with the benchmark interest rate. The central bank recently hinted that the cycle of rate hikes may soon slow down. If this happens, it will lower mortgage rates and make the real estate market more affordable for more would-be homebuyers. 

Can You Afford To Buy A House?

As mentioned, with home prices dropping this year, mortgage rates will likely follow suit at some point. This will make buying a home much more affordable for homebuyers. Your overall ability to buy a house will depend on numerous factors such as your income, debt level, credit score, down payment, home value and other related factors.

Before buying, be sure to assess your mortgage affordability so you don’t overextend yourself and fall into debt. Moreover, check your credit score as it can play a significant role in your ability to qualify for a mortgage and access low rates.

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When Will Home Prices Go Back Up?

Experts suggest that 2023 may be the weakest sales year in over two decades. Only in 2024, will Canadian housing prices likely see a return to annual price increases. 

With home sales and prices declining, now can be an affordable time for you to buy a house. In fact, with mortgage rates constantly fluctuating, it’s never a bad idea to look into getting a good mortgage rate.

How Much Will Home Prices Drop: Forecasted Home Prices In 2023

In Canada as a whole, the average 2023 home price is expected to be $662,103. Prices are forecasted to decrease by 5.9% throughout the year.

The only provinces that are expected to see an increase in average home prices over 2023 are Alberta, Newfoundland and Labrador, and PEI. The rest will likely see declines in average home prices. 

Home price changes will vary across the provinces. As per CREA, the following chart outlines the 2023 forecast for home prices and year-over-year changes for each province:

ProvinceEstimated 2023 Home Price Annual % Change in 2023
Newfoundland & Labrador$297,2063.3%
Prince Edward Island$401,0401.9%
Alberta$452,3131.1%
New Brunswick$287,237-0.8%
Nova Scotia$407,292-1.1%
Manitoba$341,872-5.3%
Saskatchewan$286,690-5.4%
Quebec$451,902-6.5%
British Columbia$926,705-7%
Ontario$850,876-8.7%

Will Housing Activity Go Back Up?

CREA predicts that 2023 will see a slight dip in sales activity in Canada. As the Bank of Canada increased interest rates, most real estate markets in the country saw a significant slowdown as of early 2022. 

However, home sales activity is forecast to jump by 10.2% in 2024 as markets continue to normalize, though the numbers are still expected to be under the 2020 and 2021 figures. By 2024, inflation should ease and interest rate hikes should slow down. In addition, the economy is expected to improve. These factors should help spur home sales activity. 

If you currently have a variable-rate mortgage and have been affected by inflation and the Bank of Canada interest rate hikes, there are a few things you can do to help ease the financial burden, including:

  • Ask your lender to defer a payment
  • Convert to a fixed mortgage
  • Get a personal loan to spread other costs
  • Extend your amortization

House Prices 2023 FAQs

Will housing be more available in 2023?

Housing availability will likely continue to be an issue in 2023. Population growth has outpaced housing inventory, and housing starts were down 5% in the 6 biggest metropolitan areas in Canada in 2022. These are some of the key reasons housing supply will still be an issue.

Will the housing market crash in 2023?

Home sales are down and home prices have dipped. And while prices are expected to decline a bit more in 2023, they’re not expected to drop so significantly that it would burst any housing bubble. As such, a housing crash is not likely in 2023. 

Will interest rates increase in 2023?

Interest rates could continue to rise throughout 2023, particularly if the Bank of Canada increases its overnight rate again at some point over the next few months. High inflation could also cause rates to continue rising, which would result in higher variable mortgage rates.

Final Thoughts

The current real estate market across Canada is certainly making it tough for prospective buyers to make a home purchase. Between sky-high home prices and rising mortgage rates, getting into the market is a real challenge. But prices are expected to drop and bottom out in early 2023, perhaps giving buyers a chance to buy at a price lower than where prices stand today.


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