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

Cullen announces bid for provincial NDP nomination for Stikine riding

Current MLA Donaldson not seeking re-election

COVID on Central Coast prompts call for information sharing

At least four cases have been identified on the central coast

NAALS receives funding for new child care centre

This project incorporates a longhouse design and reflects a Nuxalk architectural approach.

Lorena Draney celebrates 100th birthday in Bella Coola

She still knows how to enjoy a good party!

Smoky skies from US wildfires continue to affect Bella Coola

There is a special air quality warning in effect from Environment Canada for our region

3 new deaths due to COVID-19 in B.C., 139 new cases

B.C. confirms 40 ‘historic cases,’ as well

Supreme Court Justice Ruth Bader Ginsburg dies at 87

The court’s second female justice, died Friday at her home in Washington

Application deadline for fish harvester benefits program extended

Those financially impacted by the pandemic have until Oct. 5 to apply

Emaciated grizzly found dead on central B.C. coast as low salmon count sparks concern

Grizzly was found on Gwa’sala-‘Nakwaxda’xw territory in Smith Inlet, 60K north of Port Hardy

VIDEO: B.C. to launch mouth-rinse COVID-19 test for kids

Test involves swishing and gargling saline in mouth and no deep-nasal swab

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Young Canadians have curtailed vaping during pandemic, survey finds

The survey funded by Heart & Stroke also found the decrease in vaping frequency is most notable in British Columbia and Ontario

B.C. teachers file Labour Relations Board application over COVID-19 classroom concerns

The application comes as B.C.’s second week of the new school year comes to a close

CHARTS: Beyond Metro Vancouver, COVID-19 cases in B.C. haven’t increased much recently

COVID-19 case counts outside of Metro Vancouver have been level since July

Most Read