CMHC Reiterates Pessimistic Forecast For Canada’s Housing Market

Canada’s federal housing agency is doubling down on its pessimistic forecast for the future of the country’s housing market.

Citing "tremendous risks" from the COVID-19 pandemic, Canada Mortgage and Housing Corp. (CMHC) said it stands by its forecast, first issued in May, that average prices will fall between 9% and 18% from pre-pandemic levels before beginning to recover in the first half of 2021.

CMHC Chief Economist Bob Dugan reiterated that forecast in a call with journalists, although he cautioned that it’s difficult to predict the "peaks and troughs."

In its latest housing market outlook, CMHC predicts an average house price in Canada of $460,292 in the first quarter 2021, based on the midpoint of a high and low range. The average price for August, reported last week by the Canadian Real Estate Association (CREA), was $586,000. That means if CMHC’s forecast is correct, prices will plunge 21% between now and the end of March next year.

Pent-up demand has been driving Canada’s housing market to new heights in recent months. Nationally, sales rose 6.2% in August, the fourth straight month of strong gains after the market froze at the height of the COVID-19 pandemic, according to CREA. Sales are now 33.5% above year-earlier levels. Benchmark prices rose 1.7% in August and are now 9.4% higher than in August 2019.