CREA downgrades 2023 home sales forecast

The Canadian Real Estate Association (CREA) had updated its forecast for homes sales and activity and average home prices for 2023 and 2024 through the Multiple Listing Service (MLS) systems of Canadian real estate boards and associations.

With new listings not sparking an increase in sales, and interest rates continuing to weigh down the economy, CREA said it expected 449,614 residential properties to change hands by the end of the year, a decline of 9.8% from 2022. That figure was revised downward from its July estimate as a result of lower expected sales in Ontario and British Columbia.

Following a brief rally in the spring, national home sales activity has settled in recent months. Rate hikes by the Bank of Canada in June and July played a factor in this as well as the speculation surrounding how long the rates would remain high. Those summer increases also sparked uncertainty about more coming in the future.

New listings followed the typical trend of housing markets being active in spring, winding down during the summer, and an increase in the fall. However, sales remain sluggish: the national sales-to-new listings fell from 70% to 50% within five months as a rally in prices slowed or reversed, in Ontario’s case.

All of this caused the forecast for sales and average prices over the balance of 2023 and into 2024 to lower down.

Prices of homes in Alberta are expected by CREA to gain 4.8%, outperforming the rest of Canada in 2024 while Ontario is expected to see a slight increase of 0.2%. For other provinces, price growth is expected to be between the 1% to 2.5% range.

The national average home price is forecasted to decline by 3.3% on an annual basis, reaching $680,686 in 2023. This decrease from the previous forecast is because of the impact of lower sales in Ontario and British Columbia, the two most expensive provinces for real estate.

The national average home price is also expected to regain 1.5% from 2023 to 2024, reaching $690,916. This would mark the 4-year trend where the annual national average price was between the $680,000-$700,000 range.

National home sales are expected to climb 9% to 490,257 units in 2024 because interest rates get closer to trending down and housing markets start to go back to their long-term trends. This would draw closer to the recorded pre-pandemic 10-year average.

However, the forecasts may still change depending on economic data and the Bank of Canada’s next moves on its key policy interest rates. Currently, the assumed scenarios are that there will be no more hikes, there will only be one more, or that the bank will bring the rates down.