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CREA lowers housing sales, price outlook

September 20, 2022



The Canadian Real Estate Association (CREA) cut its forecast for home sales in 2022 and also lowered its expectations for price increases, but hints the bottom may have already been reached.
In its latest housing market outlook, CREA expects 532,545 properties to trade hands through the Canadian multiple listing service (MLS) this year, down 20 per cent from the 2021 annual record.
The national average home price is forecast to rise by 4.7 per cent to $720,255.
The outlook is down from CREA’s forecast in June 2022 that predicted a 14.7 per cent decline in sales this year and a 10.8 per cent increase in the national average home price.
The updated forecast came as CREA says home sales in August were down 1 per cent compared with July 2022 and 24.7 per cent lower than August 2021.
The national average home price was $637,673 in August—down 3.9 per cent from August 2021.
“August saw national sales hold steady month-to-month for the first time since February which, along with a stabilization of demand/supply conditions in many markets, could be an early sign that this year’s sharp adjustment in housing markets across Canada may have mostly run its course,” said CREA chair Jill Oudil in a release.
Several markets, including Toronto, have seen housing conditions cool in recent months as climbing interest and mortgage rates put a damper on sales and started to weigh on prices.
These rate hikes have quelled unruly bidding wars seen in many markets in the winter and are encouraging prospective buyers to wait for greater price drops.
Oudil believes many won’t be pushed into the market just yet, despite some of the recent drops.
“Some buyers may choose to remain on the sidelines until they see clearer signs of borrowing costs and prices also stabilizing,” she said.
Ahead of CREA’s data release, the housing sector is facing a “unique” situation because many potential buyers got pre-approvals from before the Bank of Canada’s tightening and are now seeing discounts between 10 and 20 per cent on housing.
“If you can buy at a discount with a mortgage rate that no longer exists, it could be enticing,” he wrote in a Wednesday note to investors.
“But the bigger picture is that there is still an enormous interest rate shock to absorb.”
The last time a similar one-year increase in the carrying cost of an average mortgage in Ontario was seen was in the late 1980s, BMO Capital Markets senior economist Robert Kavcic noted in a statement.
“In other words, this is the sharpest tightening of housing conditions in a generation, and it will come with further adjustment,” Kavic said.
However, in 1981-82, the five-year mortgage rate had spiked as high as 19 per cent—about four times higher than today’s rate.


 


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