Predicting housing prices can be a serious challenge. Predicting a housing meltdown can be even more challenging. But the Canadian Real Estate Association (CREA) is painting a cautious picture for the next year, and some are speculating whether the market is in trouble.
The CREA has revised its sales numbers lower. The agency expects most of Canada to see lower sales next year, with Ontario and British Columbia seeing the biggest declines. Some areas east of Ontario may see some growth.
For 2018, sales are expected to fall across Canada even more than previously expected. For this year, the agency forecasts an 11.2% decline in sales compared to the previous year.
This is the third time the CREA has lowered sales for 2018. In September, the agency forecasted a 9.8% dip, and in February, they projected a 7.9% decline.
Ontario is projected to have a 14% dip in sales. British Columbia is expected to see a 24% decline in sales, and Quebec is forecasted to see a 4% increase in sales.
But as the market evolves, projections evolve. It’s difficult to make sales predictions for the housing market, as factors affecting sales are constantly fluctuating. Even the weather can impact home sales. We saw this happen in the U.S., where Hurricane Florence impacted housing markets from Wilmington, North Carolina down to Myrtle Beach, South Carolina and even parts of Florida.
In 2019, things may get a little bit better. The CREA sees sales rebounding by 2.1%. Home prices are expected to keep up with inflation. Prices may climb slightly faster in Ontario, while prices in British Columbia may rise a bit more slowly.
Prices in Newfoundland, Saskatchewan and Labrador are expected to dip, while prices in Nova Scotia, New Brunswick, Quebec and Prince Edward Island are projected to rise. Alberta’s prices are expected to remain stable, but oil prices may affect this projection.
Rising interest rates will also impact sales. Big banks are expected to continue raising rates to 2.25% to 2.75% by the end of next year.
Will Canada face another home crisis in the near future? It’s possible, but economists say the risk is still low.
Still, there are signs of trouble in the market. In November, the CREA said sales and prices fell again. Slower activity in Vancouver and Toronto have dragged down the market. Sales of existing homes were down 2.3% in November and 12.6% lower than the same period last year. This dragged down Canada’s national home resale price to $488,000, down 2.9% compared to last year.
Economists at CIBC predict that the housing market would be a drag on the country’s economic growth next year.
Still, economists say the market is not likely to crash. Instead, they expect prices to stagnate as wages increase and slowly catch up.
In Toronto, the supply of new homes is limited and rent prices are sky-high, which will maintain demand for homes. These factors, economists say, point to a rosier outlook for the market in the future.
For now, the CREA sees a brighter outlook for next year. But of course, that could change as the world and the economy changes.