CMHC was wrong in spring outlook, remains cautious now

March 4, 2021

In May 2020, the Canada Mortgage and Housing Corporation (CMHC) forecast that national housing sales would slump and that average house prices would fall from 9 per cent to 18 per cent over the coming 12 months proved inaccurate.
Instead, housing sales and prices soared to near-record highs right across the country during 2020 and continue strong into 2021.
Yet CMHC continues to hedge its bets on the performance of the housing market.
In its latest forecast, released February 28, CMHC agreed its original forecast underestimated the market, but added “major risks remain.”
“In particular, employment conditions remain below pre-COVID levels while the high level of supportive government income measures are temporary in nature,” said CMHC senior economist Gustavo Durango in the report.
CMHC now says low rates helped drive higher home sales, while a lack of inventory in the face of high demand has caused prices to increase.
But the Canadian Real Estate Association (CREA) confirms that housing demand remains at all-time highs.
Canadian home sales climbed 2 per cent between December 2020 and January 2021 to set another new all-time record, CREA reported.
Seasonally adjusted activity was running at an annualized pace of 736,452 units in January—significantly above CREA’s current 2021 forecast for 583,635 home sales this year.
“Sales will be hard pressed to maintain current activity levels in the busier months to come absent a surge of much-needed new supply; although, that could materialize as current COVID-19 restrictions are increasingly eased and the weather starts to improve,” noted CREA chair Costa Poulopoulos.