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OTTAWA — The Canadian Real Estate Association is cutting its forecast for home sales this year and lowering its expectations for price growth.
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In its latest housing market forecast released Thursday, the association said it expects 532,545 properties to trade through Canada’s MLS systems this year, down 20% from the annual record of 2021.
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The national median home price is forecast to rise 4.7% to $720,255 by the end of the year and the premium will rise another 0.2% to $721,814 in 2023.
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The outlook is worse than CREA’s forecast in June, which predicted a 14.7 percent decline in sales this year and a 10.8 percent increase in the national median home price.
The updated forecast came after the CREA revealed that seasonally adjusted home sales in August totaled 36,914, down one percent from July. The actual number of home sales totaled 38,368, down nearly 25 percent from last August.
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The national median home price was $637,673 in August, down 3.9% from the same month last year.
“In August, national sales held steady on a monthly basis for the first time since February, which, along with stabilizing supply/demand conditions in many markets, may be an early sign that this year’s sharp correction in Canadian housing markets may have the most is already on its way,” Jill Udill, CREA chair, said in a release.
Several markets, including Toronto, have seen housing conditions cool in recent months as rising interest and mortgage rates hampered sales and began to weigh on prices.
The rise in interest rates quelled the rampant bidding wars seen in many markets over the winter and encouraged prospective buyers to wait for bigger price declines.
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Udil believes many of them will still not be pushed onto the market, despite some of the recent declines.
“Some buyers may choose to stay on the sidelines until they see clearer signs of stabilization in borrowing costs and prices,” she said.
Ahead of the release of the CREA data, BMO Capital Markets senior economist Robert Kavcic said the housing sector faces a “unique” situation as many potential buyers were pre-approved before the Bank of Canada tightened and are now seeing discounts of between 10 and 20 percent on housing.
“If you can buy at a discount with a mortgage rate that no longer exists, that could be attractive,” he wrote in a note to investors on Wednesday.
“But the bigger picture is that there is still a huge interest rate shock to absorb.”
The last time such a one-year increase in current costs for the average home purchase in Ontario was seen was in the late 1980s, he added.
“In other words, this is the sharpest tightening of housing conditions in a generation and will come with further adjustments.”