{"id":15745,"date":"2020-06-04T10:10:00","date_gmt":"2020-06-04T17:10:00","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=15745"},"modified":"2020-05-31T14:48:16","modified_gmt":"2020-05-31T21:48:16","slug":"alarming-home-price-forecast-pandemic-fallout-subsequent-recovery","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2020\/06\/alarming-home-price-forecast-pandemic-fallout-subsequent-recovery\/","title":{"rendered":"Alarming Home Price Forecast, Pandemic Fallout &#038; Subsequent Recovery"},"content":{"rendered":"<p style=\"text-align: justify;\">Last week, the head of Canada\u2019s housing agency made a startling prediction that home prices could fall up to 18 percent in the next year as a result of the economic devastation caused by the COVID-19 pandemic.<\/p>\n<p style=\"text-align: justify;\">Canada Mortgage and Housing Corporation (CMHC) President Evan Siddall\u2019s comments during testimony before the House of Commons Finance Committee were widely reported by media across the country (including this publication).<\/p>\n<p style=\"text-align: justify;\">The media frenzy inspired by the comments was not surprising due to both the source of the warning and the scale of the decline Siddall warned of \u2014 even his low-end prediction was a nine percent price dip.<\/p>\n<p style=\"text-align: justify;\">The CMHC is Canada\u2019s public mortgage insurer and responsible for hundreds of billions of dollars in assets. So when the president of Canada\u2019s largest Crown corporation makes a dire prediction like this one, it gets picked up, not just nationally, but beyond the country\u2019s borders as well.<\/p>\n<p style=\"text-align: justify;\">An article published this week by Australian business daily The Australian Financial Review, carried the headline \u2018Canadian housing market to crater amid pandemic\u2019 and cited only the CMHC\u2019s recent commentary on the pandemic\u2019s housing market impact.<\/p>\n<p style=\"text-align: justify;\">But since Siddall\u2019s House of Commons testimony was reported, several prominent industry voices have criticized the claim, zeroing in on the potential worst-case scenario 18 percent price drop figure.<\/p>\n<p style=\"text-align: justify;\">Brokerage RE\/MAX Canada was quick to jump on the claim with a blog post titled \u2018No Nosedive Ahead for Canadian Real Estate Prices.\u2019 In it, the brokerage cited economists from several large Canadian banks who believe the market is at risk of a milder 5 to 10 percent decline as things currently stand.<\/p>\n<p style=\"text-align: justify;\">\u201cRE\/MAX brokers in some of the biggest Canadian real estate markets say a dramatic price drop is unlikely under current conditions, barring any major unforeseen circumstances \u2014 and as we\u2019ve all come to learn recently, anything is possible,\u201d the brokerage said in the blog post.<\/p>\n<p style=\"text-align: justify;\">\u201cBut assuming current market conditions remain stable, the current inventory of homes for sale continues to fall short of demand \u2014 even amidst this pandemic, social distancing measures and the economic fallout,\u201d the blog post continued.<\/p>\n<p style=\"text-align: justify;\">Stephen Brown, an economist at Capital Economics, cautioned that the CMHC forecasts are \u201cnot as alarming as they first seem\u201d but the \u201cvery public warning\u201d from the Crown corporation could become self-fulfilling. He went on to note that his firm\u2019s forecast pegs the pandemic-induced fall in Canadian home prices at 5 percent.<\/p>\n<p style=\"text-align: justify;\">Further, he explained that the CMHC is looking at declines to average selling prices, while Capital Economics makes forecasts based on the Teranet-National Bank Home Price Index. The difference is that predictions based on selling price look simply at the average sale price for all homes sold during a particular period, while the Home Price Index-based forecast looks at the price change for any given home over time.<\/p>\n<p style=\"text-align: justify;\">\u201cThis is an important distinction, because changes in average selling prices and changes in like-for-like house prices can be very different in downturns,\u201d Brown wrote.<\/p>\n<p style=\"text-align: justify;\">\u201cAs we have already seen in the home sales data for April, during market downturns the proportion of higher-value homes that are sold often falls significantly. That in turn pulls down the average selling price,\u201d he added.<\/p>\n<p style=\"text-align: justify;\">In its blog post, RE\/MAX Canada highlighted the regional diversity in how markets will experience the pandemic fallout and subsequent recovery. The brokerage said a five percent price correction is possible in Vancouver while prices appear to be stable so far in Toronto. Alberta\u2019s major markets are expected to be hit hardest as they grapple with an oil price shock significantly impacting employment.<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.livabl.com\/2020\/05\/canadas-housing-agency-criticized-alarming-home-price-forecast.html\" target=\"_blank\" rel=\"noopener noreferrer\">Canada&#8217;s Housing Agency Criticized for Alarming Home Price Forecast<\/a> by Sean MacKay | Livabl<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Last week, the head of Canada\u2019s housing agency made a startling prediction that home prices could fall up to 18 percent in the next year as a result of the &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2020\/06\/alarming-home-price-forecast-pandemic-fallout-subsequent-recovery\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-15745","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Alarming Home Price Forecast, Pandemic Fallout &amp; 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