Some buyers were accelerating their purchases, motivated by fear that they would be priced out of the market if they waited. Others, primarily investors, were buying real estate on the assumption that prices would keep rising. This is significant, because when speculative activity drives prices unsustainably higher, an economic shock can prompt a sharp decline.
Anyone who remembers the housing market of the early 1990s in Toronto and Vancouver will recognize this point. And the impact of such a drop is magnified when the homeowners are highly indebted. The Bank has raised the key policy interest rate five times over the past year and a half, by a total of 125 basis points.