Home price outlook a guess at best
May 19, 2020
Average home prices in Canada increased in April—despite the most dramatic plunge in housing sales ever seen.
Now forecasts for what will happen to home prices once the pandemic panic ends appear to be anyone’s guess.
Some realtors note strong—in some areas record-breaking—2020 sales prior to the pandemic point to a release of pent-up demand and a lack of listings that will drive prices higher when restrictions are lifted.
Others say high jobless numbers and economic ravages caused by the pandemic suggest home prices will crater as owners are forced to sell.
National home sales in April dropped 56.8 per cent compared to April 2019, according to the Canadian Real Estate Association, yet benchmark prices were up 6.4 per cent year-over-year and off just 0.6 per cent from March.
“Tens of thousands of Canadians are having trouble meeting their mortgage commitments,” noted Evan Siddall, CEO of Canada Mortgage and Housing Corp. (CMHC).
Early figures suggest about 10 per cent of CMHC’s insured mortgages are already in deferral, he said.
“Forced sales will probably outweigh the offsetting impact of reduced supply of new units,” according to a CMHC report. “In the coming few quarters we expect continued reduced levels of activity, and an unreliable and volatile price mechanism.”
CMHC is predicting a 5 per cent drop in average home prices, while Moody’s Analytics sees prices dropping 10 per cent in the second quarter compared to 2019.
Despite saying that reliable forecasts are difficult given many unknown variables, CMHC chief economist Bob Dugan stated, “For Canada and for Ontario, I think, the best case we’re looking at…house prices getting back to their pre-recession levels, at the earliest, by the end of 2022.”
Some realtors disagree.
Under a best-case scenario—with restrictions easing in the coming weeks—home prices would increase at least 1 per cent by the end of the year, according to the recent Royal LePage House Price Survey and Market Survey Forecast.
“From our experience with past recessions and real estate downturns, we are not expecting significant year-over-year price changes in 2020,” said Royal LePage president and CEO Phil Soper.