Canada’s realtors are looking forward to more stability in the housing market over the coming months. But the Canadian Real Estate Association cautions that tightening inventories, and the depth and length of this year’s expected recession could significantly change its outlook.
Some Positive Signs
The latest Quarterly Forecast from CREA points to sales numbers that have remained relatively unchanged since last summer saying, “the downward adjustment to sales activity from rising interest rates and high uncertainty looks to be in the rear-view mirror.”
CREA expects more buyers to come back to the market based on two factors that, it says, have eased uncertainty:
- The Bank of Canada’s ‘pause’ on interest rate increases
- An end to sharp declines and a ‘levelling out’ of home prices
Wrinkles in the Outlook
The association believes BoC rate increases have likely topped-out. However, the Bank has said it will resume hiking if inflation continues to run above its 2.0% target. And it has said speculation about rate cuts is premature at this time.
CREA also recognizes that price declines have likely been slowed by a tight supply of re-sale homes. Inventories currently sit at 20-year lows. The association cautions that, its pricing forecasts will likely be skewed if inventories continue to tighten.
CREA’s Expectations
The latest Quarterly Forecast projects a 1.1% decline in sales, to 493,000 units for 2023, compared to 2022. That is bigger than the 0.5% dip that was predicted back in January. CREA predicts a significant improvement in sales for 2024 with a 14% increase. While that is a big jump, it would bring the market back in line with long-term trends following a volatile couple of years.
Pricing projections have improved from earlier this year but are still calling for a 4.8% decline for 2023. That is less than the 5.9% drop forecast in the January report. The National Average home price is estimated to hit $670,000. The forecast calls for a 4.7% recovery for 2024 which would push the average price to $702,000.
The Wildcard
The Canadian economy is expected to slip in to a short and mild recession later this year. But if it is harsher and longer than hoped, it could force changes to CREA’s outlook.