A new report from TD Bank suggests the average Canadian home price could fall between 20 and 25 per cent from its peak seen earlier this year by the first quarter of 2023. The report released on Monday comes as the decline in prices took place over the summer as mortgages and interest rates rose. Many expect the decline to continue into the fall and even into the winter. The latest data from the Canadian Real Estate Association (CREA) showed prices reached $629,971 in July, down 5 per cent from $662,924 last July. On a seasonally adjusted basis, it was $650,760, down 3 percent from June. The projected decline in the exposure price represents an unprecedented decline since at least the late 1980s, when the data began, but follows an uneven unprecedented rise during the pandemic, TD economist Rishi Sondhi wrote. “Our projected fall in national house prices will only partially repeat the 46% during the pandemic,” Sondhi said. “Therefore, our forecast can be more aptly described as a market recalibration, rather than something more severe.” Sondhi says the worst outcomes will likely be avoided because of several factors helping to dampen demand and home prices — the fastest rate-hike cycle in decades, rising consumer incomes and excess savings and low inventories in new markets and resale markets. Sondhi’s pricing forecast is in line with that made by a trio of Desjardins economists. They expected the national median home price to drop 15 percent between February’s high — $817,253 — and the end of 2023, but adjusted their forecast in August to predict a drop of between 20 and 25 percent. Meanwhile, CREA predicted in June that the national median home price would rise 10.8 percent annually to $762,386 by the end of 2022 and to $786,252 in 2023. Meray Mansour, a real estate agent in Toronto, said Sondhi’s prediction seems more realistic based on what she has seen in recent months. In Toronto neighborhoods like the Beaches and Leslieville, he found prices have already dropped by 10 per cent. “The really smart buyer is taking advantage of the opportunity, but some buyers are thinking a lot more … it’s going to go down a lot more,” he said. He sees this period as a “reset,” especially for sellers who are used to bidding wars and price spikes while the market has been on a tear during the pandemic. Sondhi’s report also estimated that the number of home sales will drop by 35 percent by the first quarter of 2023. “Our projected decline in Canadian home sales is well within the range seen in previous housing declines and was surpassed by the global financial crisis which saw sales decline by 38 per cent,” Sondhi wrote. CREA found that home sales in July fell 5.3 percent compared to June. The actual sales figure last month was 37,975, down 29% compared to last July. Longer term, TD remains bullish on the housing outlook because it expects population growth to remain healthy, supporting fundamental demand for housing. This report by The Canadian Press was first published on August 29, 2022.
