On September 28, Bloomberg News reported that Canadian households are increasingly optimistic about the real-estate market.
Citing a survey by Nanos Research for the news agency, the report stated that around 44 percent of respondents expect home prices to go up over the next six months.
According to the report, that’s the highest percentage since around mid-March, before the COVID-19 shutdowns began.
Meanwhile, the share of Canadian households who expect a fall in housing prices dropped to 27 percent, the lowest since the middle of March.
The report came five days after Moody’s Analytics released its forecast about the Canadian residential market.
In its report on September 23, Abhilasha Singh, an economist with the financial research firm, predicted that home prices will drop seven percent in 2021.
The forecast cited higher unemployment and lower incomes as basis for the outlook.
Two days earlier, the chief economist of Canada Mortgage and Housing Corporation, Bob Dugan, reiterated an earlier and grim prediction by the federal agency.
In June this year, CMHC forecast that average prices of homes would drop anywhere between nine percent and 18 percent.
“When I say I stand by our forecasts, it’s really with respect to what are the broad trends we expect moving forward,” Dugan said on a conference call with media on September 21. “When I look at the housing market there are a tremendous number of risks.”
Rishi Sondhi is an economist with TD Economics, and he has his own outlook about the housing market.
In a report on October 8, Sondhi wrote that “some easing” of prices may take place.
“However, unlike sales, an immediate fourth quarter pullback is unlikely,” Sondhi stated. “In fact, another (modest) gain could be in the cards.”
According to the TD bank economist, this is “largely a function of extreme market tightness heading into the fourth quarter, and the shift in sales towards larger, more expensive units in Toronto and Vancouver, as well in as other areas like Montreal”.
“After the fourth quarter,” Sondhi predicted, “Canadian prices will likely drop through the first half of 2021 by around 7%, before regaining some traction later next year.”
Sondhi stated that bigger declines are expected in oil producing provinces, where there were a lot of mortgage deferrals and population growth is anticipated to be “comparatively weak”.
“Meanwhile, lesser drops are expected elsewhere, reflecting tighter conditions, a smaller share of deferred mortgages, and a shallower drop off in sales,” Sondhi wrote.
Although official numbers have not been released, Sondhi believes that the housing market across Canada posted a record high in the third quarter of 2020.
Initial reports indicate this is the case.
For example, the Real Estate Board of Greater Vancouver (REBGV) reported that sales in the region totalled 3,643 in September 2020.
The sales represent a 56.2 percent increase from the 2,333 sales in September 2019, and a 19.6 percent increase from the 3,047 homes sold in August 2020.
September 2020 sales were 44.8 percent above the 10-year September sales average, and according to the REBGV, it is the highest total on record for the month.
Meanwhile, the Fraser Valley Real Estate Board (FVREB) reported 2,231 sales in September.
The sales constitute a 66.1 percent increase compared to the same month in 2019, and an increase of 9.4 percent over August 2020.
According to the FVREB, last month’s sales were the highest recorded sales for September in the history of the real-estate board.
In his October 8 report, TD Economics’ Sondhi wrote that the strength of the home resale market is “unlikely” to be sustained.
“A wide disconnect between housing, the economy and/or job markets doesn't tend to be sustained,” Sondhi wrote.
What’s likely to happen, according to him, is that “housing moderates than job fundamentals improve sharply from here, given the lasting impacts of the pandemic”.
“We see an orderly moderation in housing activity taking place over the next couple of quarters, as sales levels normalize from their outsized third quarter pace,” Sondhi wrote.