Average home price to end the year 4.8% lower than 2022, will rise 4.7% in 2024: CREA
A new home is shown for sale in a housing development in Ottawa on Tuesday, July 14, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Tara Deschamps, The Canadian Press
Published Friday, April 14, 2023 2:53PM EDT
The Canadian Real Estate Association expects the average price of a home to end the year 4.8 per cent lower than 2022, but says prices will rise by roughly the same amount in 2024.
The association's prediction revealed Friday amounts to an average price of $670,389 this year and $702,214 next year, when prices are expected to increase by 4.7 per cent.
The board also foresees home sales falling 1.1 per cent to 492,674 this year and then rising 13.9 per cent to 561,090 in 2024.
The forecast accounts for little change in month-over-month sales seen since summer 2022 and the modest monthly gains recorded in February and March, as buyers edged closer to make purchases.
“As the spring market heats up and it looks as though some buyers are coming off the sidelines, it's important to remember that the intense market conditions of recent years have not gone anywhere, they've just been on pause,” said Jill Oudil, CREA's chair, in a press release.
The market Canadians are re-entering has seen months of falling sales, lower listings and dampened buyer sentiment as eight successive interest rate hikes weighed on the cost of borrowing.
But in recent months, the rate has been held twice in a row, prompting some to eye purchases once more, while prices are still low.
These trends left March home sales down 34.4 per cent to 41,636 from the year before.
On a seasonally-adjusted basis, sales reached 33,833, about one per cent higher than they had been in February.
March marks the second consecutive month of higher sales, Rishi Sondhi of TD Economics pointed out.
Sondhi attributed much of the boost to interest rates stabilizing, which helped “buyer psychology” and a solid job market.
“Our forecast assumes further sales gains are in the cards this year, although an important downside risk stems from looming regulatory changes that will make it harder to qualify for mortgage,” he said, in a note to investors.
As month-over-month sales ticked up new listings remain at 20-year lows, said CREA.
On a seasonally-adjusted basis, new listings totalled 53,298 in March, down 5.8 per cent from February. Actual new listings hit 68,597, a 27.4 per cent drop from a year ago.
With supply at historic lows, Oudil said homes are not only selling but selling faster, but it has not been enough to entice some sellers to list their properties.
“Sellers will likely need to see more evidence of a sustained pickup in activity and prices before listings turn meaningfully higher,” Sondhi said.
People don't sell during a down market for several reasons, said Robert Kavcic, a senior economist with BMO Capital Markets.
Some don't have to sell because the job market is strong and there are fewer mortgage delinquencies because the Office of the Superintendent of Financial Institutions has stress-tested most buyers and investors have a strong rental market to fall back on.
“Potential sellers don't want to sell into a down market, and expectations are building that the worst of the correction is over,” he added, in a note to investors.
“The Bank of Canada's guidance has helped establish this improved market psychology.”
As that shift in thinking took shape, CREA found the average home price was $686,371 in March, down 13.7 per cent from the year prior.
Excluding the Greater Toronto and Greater Vancouver Areas, which tend to be the country's hottest markets, from the calculation cuts more than $136,000 from the national average price.
On a seasonally-adjusted basis, the average home price ticked up two per cent from February to $648,088.
CREA also said the average price was up almost $75,000 from its January 2023 level.
This report by The Canadian Press was first published April 14, 2023.