economy
PUTTING HOME PRICE DECLINES IN PERSPECTIVE Our rising and high interest rate environment has caused home values to decline over the past year, but context is important.
Home prices have been on a rollercoaster ride for the past three years. Spurred by ultra low interest rates and households with extra savings in their pockets, home prices rose sharply from late 2020 to early 2022, before peaking as interest rates started their own meteoric rise. The fact is, while home prices declined in 2022 (by 9.2% in Greater Vancouver and 19.4% in the Fraser Valley) they still sit well above their pre-pandemic values. But it’s not just home prices that ran up in value before pulling back in 2022.
The S&P 500 declined by a modest 4.6% last year, while Bitcoin dropped 37.3%, and crude oil by 38.2%. Meanwhile, yields on the one investment considered risk-free, the Government of Canada five year bond, nearly doubled last year. Last year was, in part, a recalibration of asset values. Loose monetary policy, including low interest rates and fiscal supports drove asset values up, followed by a tightening of monetary policy which reined them back.
WHAT GOES UP SOMETIMES DOES, INDEED, COME DOWN
120%
97.8%
100%
80%
60%
40%
18.8%
20%
12.2%
11.7%
7.7% 7.8%
6.6%
4.9%
4.4%
1.4%
0%
-4.6%
-9.2%
-10.8%
-20%
-19.4%
-37.3%
-38.2%
-40%
-60%
WTI CRUDE BITCOIN
FVREB BENCHMARK
GOLD
REBGV BENCHMARK
S&P CAD USD
YR GOC BOND YIELD
PAST YEAR CHANGE
AVERAGE ANNUAL CHANGE, PAST YEARS
DATA: YEAR-OVER-YEAR ASSET PRICE CHANGES SOURCE: VARIOUS
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