CREA downgrades sales forecast for 2023
The Canadian Real Estate Association (CREA) has revised its home sales forecast, predicting a decline in sales for this year and the next due to fewer buyers entering the market. According to CREA, it expects 464,239 properties to be sold in 2023, reflecting a 6.8 percent decrease from the previous year. The new forecast also anticipates 516,043 properties being sold in 2024.
In an earlier forecast released in April, CREA projected a smaller decrease of 1.1 percent in home sales for this year, with 492,674 properties expected to be sold. For 2024, the forecast predicted a total of 561,090 properties being sold. The revised forecast takes into account the recent rebound of sales in various regions of the country but also considers the impact of rising interest rates, which are affecting borrowing costs and buyer sentiment.
The real estate market continues to face challenges due to a lack of housing supply in many markets, although the association notes that prices have not been as greatly impacted as sales. The national average home price is projected to experience a marginal decrease of 0.2 percent from 2022, amounting to $702,409 this year. However, prices are expected to rebound and reach $723,243 in 2024. The April forecast estimated an average price of $670,389 for 2023 and $702,200 for 2024.
One significant factor influencing prices is the limited number of new listings, which remain below pre-pandemic levels in several markets. CREA explains that while new listings are starting to catch up with sales, this is not expected to lead to significant activity growth, as some buyers may choose to wait for signals from the Bank of Canada and the data it relies on to inform its policy decisions. Moreover, there is a growing consensus that interest rates will not only increase but also remain higher for a prolonged period, potentially until 2024.
CREA's home sales forecast coincided with the release of national housing figures for June, which demonstrated a 1.5 percent month-over-month increase in seasonally-adjusted sales, reaching 40,449 transactions. Compared to the same period last year, actual sales saw a 4.7 percent increase, reaching 50,155 transactions. The average price for June was $709,218, marking a 6.7 percent increase from June 2022. On a seasonally-adjusted basis, the average price was $709,103, reflecting a 0.7 percent decrease from the previous year. New listings declined by 11.1 percent from the previous year to 84,749, but on a seasonally-adjusted basis, they increased by 5.9 percent from the previous month to 63,571.
Larry Cerqua, the chair of CREA, stated that housing markets appear to be stabilizing as they recover from the significant fluctuations experienced over the past year. Cerqua emphasized that the recent recovery in new listings will provide buyers with more options and help slow down price growth during the second half of the year.
In Conclusion
While CREA's downgrade of its sales forecast for 2023 may be concerning, it's important to understand the context behind the decision. Factors like rising mortgage rates, affordability issues, and political developments could all impact the Canadian real estate market in the years ahead. However, by staying informed and working with experienced professionals, buyers and sellers can still find success in today's market.
