CMHC sticks with downbeat forecast

June 30, 2020

In mid-May, Canada Mortgage and Housing Corp. (CMHC) forecast a 9 to 18 per cent decline in average home prices stating, “Canada will see a historic recession in 2020 with significant falls in indicators of the housing market,” in a special spring edition of its Housing Market Outlook.
Many in the real estate community dismissed it as overly pessimistic. And they were right.
Residential industry experts say there are signals that the sales downturn could be brief and that prices are already recovering.
“We are seeing enquiries from homebuyers up 5 per cent from pre-COVID levels,” said Elton Ash, Western Canada executive vice-president for Re/Max.
 “The drop in prices that CMHC is suggesting is unrealistic,” Ash said.
According to the Canadian Real Estate Association (CREA) the composite MLS home price index (HPI) for homes across Canada was up 5.3 per cent in May from May 2019.
The actual (not seasonally adjusted) national average price for homes sold in May 2020 was $494,500, down 2.6 per cent from the same month in 2019, but CREA, notes the composite MLS HPI is more accurate.
“The MLS HPI provides the best way to gauge price trends,” CREA stated, because it removes monthly swings in sales.
CMHC, however, stuck with a downbeat forecast in its most recent housing report, released June 23.
It now contends that home prices nationally will decline up to 12 per cent over the next 18 months before recovering in 2022.
CMHC’s deputy chief economist Aled ab Iorweth cautioned that any predictions the agency makes over the next few months will be subject to a high degree of volatility because of the pandemic.
For Toronto, CMHC predicts average home prices could decline between 3 and 10 per cent by 2021, with the softening mostly in the condominium sector.
Home sales in Toronto are forecast to decrease for the rest of the year, before recovering in 2021, CMHC contends.