CREA lowers the sales forecast because interest pressures on buyers
The Canadian Real Estate Association has downgraded its forecast for home sales for this year and next as fewer buyers enter the market.
The association said Friday it expects 464,239 owned properties to be traded this year, down 6.8 percent from last year. It also now predicts that 516,043 will be sold in 2024.
In an April forecast, CREA said it expected 492,674 homes to be sold this year, down 1.1 percent from 2022. Home sales for 2024 would total 561,090.
The forecast took into account a revenue recovery that has taken shape in most parts of the country in recent months, as well as interest rate hikes, which continue to weigh on borrowing costs and buyer sentiment.
The combination of circumstances means that many markets are still hampered by a lack of supply, although the association said prices are not suffering as much as sales.
It now predicts that the national median home price will fall 0.2 percent from 2022 to $702,409 this year before rising to $723,243 in 2024.
The April forecast pointed to an average price of $670,389 for this year and $702,200 in 2024.
One of the biggest factors weighing on prices is new quotes, which remain below pre-pandemic levels in many markets.
“New offerings are now catching up with sales, although this is not expected to translate into further large gains in activity as some buyers are likely to move back to the sidelines, as in 2022, to wait for additional signals from the Bank of Canada and the data on which the policy is based,” the association said in a Friday release.
“Looking beyond that, there is also a growing consensus that rates will not only be higher, but likely to last longer – well into 2024.”
CREA’s forecast was released at the same time as the national housing numbers for June, which showed May seasonally adjusted sales were up 1.5 percent to 40,449.
The actual number of sales was 50,155, an increase of 4.7 percent from a year earlier.
Meanwhile, the average price reached $709,218, up 6.7 percent from June 2023. On a seasonally adjusted basis, it was $709,103, down 0.7 percent from a year earlier.
New listings were down 11.1 percent from last year to 84,749, but 5.9 percent higher than seasonally adjusted from the previous month to 63,571.
“Residential markets appear to be stabilizing towards summer after some major ups and downs over the past year,” CREA president Larry Cerqua said in a press release.
“Most importantly, the rebound in new listings in recent months will give buyers more choice and should help slow price growth in the second half of the year.”
BMO Capital Markets economist Shelly Kaushik saw June’s numbers as evidence of continued market recovery and rejected the Bank of Canada’s June rate hike.
“One rate hike was not enough to cool market psychology in June,” she wrote in a note to investors.
Her view was based on the fact that the country recorded its fifth consecutive monthly increase in sales with activity levels firmly in pre-pandemic ranges.
However, she noted that the national sales figure masked some regional differences, including a 6.9 percent decline in home sales in the Greater Toronto Area, which was more than offset by gains in BC and Alberta.
Looking ahead, she expected activity to “take a breather in the coming months after (what we believe is) the latest bank raise” that came this week.
“The bank is expected to remain on hold for the rest of the year, but (we) will be watching closely to see how much the housing recovery will contribute to broader inflation metrics.”
This report from The Canadian Press was first published on July 14, 2023.
