Real estate for sale signs are shown in Oakville, Ont. on Saturday, Dec.1, 2018. THE CANADIAN PRESS/Richard Buchan

CMHC sees declines in home prices, sales, starts that will linger to end of 2022

CMHC said average housing prices could fall anywhere from nine to 18 per cent in its forecast

Canada’s housing sector will see a retreat in prices, sales and building in the months ahead and likely won’t see a return to pre-pandemic levels until at least the end of 2022, said Canada Mortgage and Housing Corp. in an outlook released Wednesday.

The federal housing agency sees pressure on the sector as it doesn’t see any quick ‘V’ shaped recovery. Instead in a best case, CMHC said it could come back in a somewhat slower ”U” shape while its more pessimistic scenario is a more flat prolonged “L” shaped.

“We don’t expect this to be a very quick recovery,” said Bob Dugan, chief economist for CMHC in a conference call.

CMHC said average housing prices could fall anywhere from nine to 18 per cent in its forecast, and as much as 25 per cent in oil-producing regions. In the faster recovery scenario, prices could start to recover by mid-2021, while a slower recovery prices might not be back to pre-COVID-19 levels at the end of 2022.

The more pessimistic scenario could see deferred mortgages turning into foreclosures if the job market doesn’t recover and bank loan losses increase, Dugan said.

“If there’s enough foreclosures and banks are taking losses because of this, it could affect their willingness to lend and it could lead to a bit of a freezing up of liquidity in lending markets,” Dugan said.

Pressure on prices will come as sales drop, with an expected 19 to 29 per cent decline in sales from pre-COVID levels this year as job losses affect buying decisions.

“Households, when there’s so much uncertainty, they tend to be more cautious on purchases,” said Dugan.

READ MORE: Home prices won’t recover from COVID for at least 2 years, CMHC says

He noted that job losses are already worse than perceived in the official 13 per cent unemployment rate for April, as it would be closer to 20 per cent if all the people who have left the job market since the outbreak began were factored into the rate.

Uncertainty in the housing market will also affect new home building, which could see declines of between 50 and 75 per cent this year compared with pre-COVID-19 levels before starting to rebound next year.

The forecast is more pessimistic than what Canadian banks have forecast, including National Bank that said Wednesday it expects a drop of about 10 per cent in prices.

National Bank said home price declines will be somewhat limited because the job losses are concentrated in sectors that generally have lower rates of home ownership.

It does, however, see pressure on the market because interest rates were already so low before the crisis started that central banks have little policy room to manoeuvre, while drops in tourism could also put pressure on the economy and push what had been short-term rentals onto the housing market.

Other banks have provided a range of forecasts since the pandemic hit Canada in mid-March.

CIBC said in early May that it expects home prices to have fallen between five and 10 per cent compared with 2019 levels before starting to recover, while TD Bank said in late April that it still expected home prices to rise by 6.1 per cent this year.

Dugan said there is a great deal of uncertainty overall so it’s hard to give a precise forecast and CMHC may be basing its forecast on different data than used by the banks.

“Our forecast is a little on the pessimistic side…it is just a very tough time for the economy,” Dugan said. ”There are a lot of mortgage deferrals, there’s a very high level of unemployment, so I don’t know if our forecast factors in more recent data on the economy.”

Ian Bickis, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

HousingReal estate

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Haitian foster children arrive in Nelson after months-long lobbying effort

Marie-Paule Brisson and Sebastien De Marre have parented girls age 12 and 8 since they were babies

RDCK to implement new emergency alert notification system

System also includes sends alerts for water advisories

Summer Reading Club program kicks off at Nakusp Public Library

Kids can sign up for the program online or at the library

From baseball stars to forest fires: Southeast Fire Centre water bomber has an interesting past

Tanker 489 is stationed in Castlegar this year, but in the 1960s it belonged to the L.A. Dodgers.

Claire Paradis joins Nakusp Public Library as new library director

Paradis said main goal is getting library back open to the public

Amber Alert for two Quebec girls cancelled after bodies found

Romy Carpentier, 6, Norah Carpentier, 11, and their father, Martin Carpentier, missing since Wednesday

B.C. man prepares to be first to receive double-hand transplant in Canada

After the surgery, transplant patients face a long recovery

Grocers appear before MPs to explain decision to cut pandemic pay

Executives from three of Canada’s largest grocery chains have defended their decision to end temporary wage increases

Bringing support to Indigenous students and communities, while fulfilling a dream

Mitacs is a nonprofit organization that operates research and training programs

RCMP ‘disappointed’ by talk that race a factor in quiet Rideau Hall arrest

Corey Hurren, who is from Manitoba, is facing 22 charges

NHL’s Canadian hubs offer little economic benefit, but morale boost is valuable: experts

Games are slated to start Aug. 1 with six Canadian teams qualifying for the 24-team resumption of play

‘Made in the Cowichan Valley’ coming to a wine bottle near you

Cowichan Valley has the honour of being the first sub-GI outside of the Okanagan

VIDEO: Vancouver Island cat missing 18 months reunited with family

Blue the cat found at Victoria museum 17 kilometres from home

Most Read