TD Economics expects more bad news for the Canadian housing market.
National sales figures are set to be released this week, likely showing another decline because of high borrowing rates.
Meanwhile, the Bank of Canada is anticipated to increase its interest-setting rate two more times before the end of 2022.
This means home buyers face higher mortgages, thereby dampening market activity.
“Based on early readings of transaction data over July, we are expecting the peak-to-trough decline in prices since the first quarter to continue to push towards our forecast of 19%,” TD Economics stated in a summary of recent events and what to expect ahead.
The post was written by Toronto Dominion bank’s director of economics, James Orlando.
“With the BoC unlikely to pause on rate hikes until later this year, the real estate sector's fall from grace isn't done yet,” Orlando stated.
The central bank has raised its interest rate four times so far in 2022, which now stands at 2.5 percent.
It can be recalled that the Canadian housing market sizzled in 2020 and 2021 after the Bank of Canada dropped its interest rate to a historic low of 0.25 percent.
With inflation raging across the country, the central bank has aggressively hiked interest rates.
Orlando noted that inflation seemed to have eased in July 2022, but is “unlikely to cause policymakers” at the central bank to change course.
“The BoC is poised to continue hiking its policy rate at a significant pace as it will need much more evidence that inflation is declining,” Orlando wrote.
The central bank is projected to hike interest rates in September and December this year.
“We are looking for the policy rate to reach 3% by September, getting to 3.25% by year-end,” Orlando stated.
In June 2022, national home sales fell by 5.6 percent on a month-over-month basis from May.
The Canadian Real Estate Association previously reported that monthly activity dropped 23.9 percent below the June record set in 2021.
Meanwhile, the number of newly listed properties was up 4.1 percent month-over-month in July.
The CREA also reported that the benchmark price declined 1.9 percent month-over-month, but was still up 14.9 percent year-over-year.
Moreover, the actual national average sale price marked a 1.8 perent year-over-year decline in June 2022.
The CREA is expected to release July 2022 market numbers Monday (August 15).
In B.C., home sales dropped 42.4 percent in July compared to the same month in 2021.
However, the average price of a home in the province last month posted a 3.6 percent annual increase last year.More