The Canadian Real Estate Association (CREA) recently released its latest predictions for the country’s housing market, and the outlook is mixed. While home prices are expected to decline this year, the association anticipates a rebound in 2024. However, home sales are projected to drop in 2023 before recovering in the following year.
According to CREA, the average price of a Canadian home will be $670,389 in 2023, down 4.8% from the previous year. But the association forecasts that prices will rebound in 2024, rising 4.7% to reach an average of $702,214. CREA’s projections take into account the modest monthly gains recorded in February and March 2023, as buyers returned to the market.
Home sales are also expected to decline this year, dropping 1.1% to 492,674. However, the association predicts a 13.9% increase in sales next year, with 561,090 homes sold. This projection is based on the assumption that there will be little change in month-over-month sales since the summer of 2022.
While interest rates have been on the rise in recent years, CREA believes that the recent stability in rates has helped to boost buyer sentiment. Rishi Sondhi, an economist at TD Economics, attributes the recent uptick in sales to interest rates stabilizing and a solid job market. Sondhi notes that “our forecast assumes further sales gains are in the cards this year, although an important downside risk stems from looming regulatory changes that will make it harder to qualify for a mortgage.”
However, despite the increase in buyer sentiment, new listings remain at 20-year lows, with only 53,298 new listings in March 2023, down 5.8% from the previous month. Actual new listings hit 68,597, a 27.4% drop from a year ago. With supply at historic lows, homes are selling faster, but it hasn’t been enough to entice some sellers to list their properties.
Robert Kavcic, a senior economist with BMO Capital Markets, notes that “potential sellers don’t want to sell into a down market, and expectations are building that the worst of the correction is over.” Kavcic adds that “the Bank of Canada’s guidance has helped establish this improved market psychology.”
The CREA’s projections also suggest that the Canadian housing market is heavily influenced by the Greater Toronto and Greater Vancouver Areas, which tend to be the country’s hottest markets. Excluding these two areas from the calculation cuts more than $136,000 from the national average price. In March 2023, the average home price was $686,371, down 13.7% from the previous year. However, on a seasonally-adjusted basis, the average home price ticked up two per cent from February to $648,088.
Overall, CREA’s predictions suggest that the Canadian housing market is in a state of flux, with declining prices and sales in the short term, but potential for a rebound in the coming years. However, regulatory changes and supply constraints remain key risks to the market’s stability.
