Interest rates took the steam out of Canadian home prices last month, with the latest Teranet-National Bank Composite House Price Index seeing its first dip in five months.

The index — it tracks observed or registered home prices across 11 CMAs, so long as they have been sold at least twice — fell 0.4%, on a seasonally adjusted basis, between September and October. Before adjusting for seasonal effects, the index slipped by 1% in September (after seeing a 1.3% decrease the month prior), marking the second straight monthly decline.

Teranet and National Bank attribute those drops to the broader context of the resale market, which they say is “losing momentum” due not only to rising interest rates, but exacerbated affordability problems and a “less buoyant” job market.

“Indeed, market conditions have eased across the country, so that the number of months of inventory rose to 4.1 in October, a level similar to that prevailing before the pandemic, but still lower for the moment than the historical norm,” says a press release accompanying October’s reading.

Although the composite index represents a “weighted average” of observed or registered home prices in Victoria, Vancouver, Calgary, Edmonton, Winnipeg, Hamilton, Toronto, Ottawa-Gatineau, Montreal, Quebec City, and Halifax, Teranet and National Bank track prices in 31 Canadian cities in total. Of those, 58% saw home prices soften to some degree.

More specifically, home prices slipped month over month in Toronto (-1.6%), Edmonton (-1.2%), Vancouver (-1.1%), Ottawa-Gatineau (-1.1%), Saint John (-5.3%), Trois-Rivières (-3.3%), and London (-2.5%).

On the flip side, monthly increases were observed in Montreal (+3.7%), Halifax (+1.1%), Winnipeg (+1.0%), Moncton (+4.6%), Kingston (+3.8%), and Peterborough (+2.6%).

“In the months ahead, prices are likely to continue to decline, while interest rates remain high and the economic context will be less favourable, representing headwinds for the sector despite the support of historical demographic growth,” says the release.

Year over year, the index edged up 2.8% last month. This was due to gains recorded in Halifax (+12.5%), Victoria (+6.5%), and Quebec City (+6.3%). As well, Moncton and Sherbrooke saw annual price gains of 13% and 9.4%, respectively.

Conversely, home prices lagged on a year-over-year basis in Edmonton (-3.6%), Ottawa-Gatineau (-0.5%), London (-2.1%), and Barrie (-0.9%).

Almost 60% of Canadian Markets Saw House Prices Lag in October by Zakiya Kassam | Storeys