Don’t expect it to last too long, says Oxford Economics
The real estate market of Canada is on a high with prices and sales skyrocketing in most parts of the country. Some markets even rose by tens of thousands in May. But it may just be a temporary boost that may not last too long, warns Oxford Economics. It also notes that the pullback for existing home prices is less than halfway to their forecast bottom.
While seasonally adjusted existing home sales rose 5.1 per cent in May when compared to a month before, unadjusted sales were 1.4 per cent higher than the same time last year, despite buyers dealing with much higher interest rates. Rising sales were generally seen across Canada, with the volume rising in 70 per cent of markets. However, it’s worth emphasizing that existing home sales remain below the 10-year average.
“Canada’s resale housing market revival continued in May as home sales and prices rose once again last month,” says Tony Stillo, Director of Canada Economics. “However, we believe the spring housing upswing will fade this summer as interest rates rise further and expect a 10 per cent drop in home prices by early next year,” he adds.
A brief dip in mortgage rates sent exuberant buyers panicking to get into the market. That’s helped send home prices 2.1`per cent higher in just one month, leaving them 12 per cent below the record high in February 2022. For context, despite new housing supplies rising significantly faster than population growth, prices jumped 62 per cent from December 2019 to peak. “There may be a flurry of sales before the Bank of Canada next rate decision in July. However, as interest rates move higher and Canada slips into recession, we expect weaker housing demand and higher listings will cause home prices to resume falling, resulting in an overall 20-25 per cent peak-to-trough decline from the February 2022 high.”
