Earlier this year,
the Canada Mortgage and Housing Corporation made a now-infamous prediction that
home prices would fall by up to 18% over the course of 2020 and into 2021.
Instead, prices have
since risen by approximately 22% to $603,000, as of November.
That discrepancy
illustrates how difficult forecasting the housing market has become due to the economic
uncertainty created by the pandemic.
For instance,
factors suggesting a strong economic recovery in 2021 include promising
developments on the vaccine front, sizeable spending by the federal government
to support and stimulate the economy, pent-up consumer demand and historically
low interest rates.
On the other hand,
rising COVID infection rates, long-term unemployment and a drop in exports are
just a few of the factors that could continue to hinder the economy, and in
turn impact housing demand and home prices.
Current Home
Price Forecasts for 2021
Despite the
challenges of forecasting in today’s environment, multiple predictions have
been issued over the past couple of weeks. Here’s a summary of where analysts
see home prices headed in 2021:
The Bulls
The
Canadian Real Estate Association (CREA): +9.1%
o "Current trends and the outlook for
housing market fundamentals suggest activity will remain relatively healthy
through 2021, with prices either continuing to climb or remaining steady in all
regions," the association said, pointing to continued supply shortages in
Ontario and Quebec.
RE/MAX
Canada: +4% to +6%
o "While we’ve seen a significant shift in buyer
preferences this year, we believe factors such as the supply issue, pent-up
demand and historically lower interest rates will continue to fuel activity in
2021,” Elton Ash, a regional executive vice president at RE/MAX, said in a
release.
Royal
LePage: +5.5%
The Bears
RBC
(+0.6%) and Scotiabank (+0.4%)
o Both banks essentially expect flat price
growth over the year, citing continued pandemic-related economic headwinds,
continued weakness in regional condo markets and growing affordability
concerns.
Fitch
Ratings: -3% to -5%
o "Declining rents, a significant drop in
immigration and the B-20 mortgage affordability stress test will put pressure
on Canadian home prices, which are expected to decline by 3%-5% in 2021 due to
elevated unemployment levels and affordability issues,” the company said in a release.
CMHC:
-9% to -18%
o As recently as September, CMHC announced it was
standing by its original forecast of a peak-to-trough decline in home prices of
between 9% and 18% before they start to recover in 2021. While the timing may
be unknown, CMHC’s Chief Economist Bob Dugan said he continues to see risk in
the market and noted that current demand levels aren’t sustainable. "I’m not
convinced that we have a sustainable basis for housing demand in the economic
disturbance that’s going on related to COVID-19,” he told reporters in
September. "…I certainly believe in the overall trend that there’s scope for
price declines, for weaker demand and after that resolves itself eventually a
recovery once we have a vaccine in place.”
With
current forecasts all over the map, some will prove to be more accurate than
others. But given how wrong the forecasts from earlier this year turned out to
be, the lesson learned is not to take any home price predictions to the bank.
And it may not be
worth timing your house purchase around hypothetical scenarios that may or may
not transpire. By speaking with a mortgage professional, you can decide the
best time to buy a house, and put a plan together, regardless of what’s
happening or not happening in the housing market.