CREA boosts 2019 forecast
OTTAWA – For the second time this year, the Canadian Real Estate Association (CREA) has upwardly revised its quarterly forecast and now believes home sales via its Multiple Listing Service (MLS) will gain 5% by the end of 2019 and will jump another 7.5% next year. They attributed the anticipated climb to a number of factors including population and employment.
This is good news for big ticket home goods retailers of all kinds as each home sale is expected to generate between $6,000 and $6,500 in furniture, mattress and major appliance sales over the next three years.
“Economic fundamentals underpinning housing activity remain strong outside of the Prairies and Newfoundland & Labrador,” CREA said in its forecast. “Population and employment growth have both remained supportive and the unemployment rate remains low. At the same time, expectations have become widespread that the Bank of Canada is unlikely to raise interest rates over the rest of the year and into next.”
The realtors’ group also noted longer term mortgage rates have been declining – most importantly the five-year rate used by banks to qualify mortgage applicants. “The decline in mortgage rates is arguably the most important development since the release in June of CREA’s most recent forecast,” the association said.
The forecast also said price declines in the Lower Mainland of British Columbia and across the Prairies may be abating while those across Ontario’s Golden Horseshoe region are showing signs of re-accelerating.
“Strong economic fundamentals, previously unexpected declines in mortgage interest rates and stronger than previously expected housing market trends in British Columbia and Ontario have resulted in CREA upwardly revising forecast home sales in 2019 and 2020,” the forecast said, adding it expects overall national sales to remain below those prior to the implementation of the stress test.
CREA said national home sales are now projected to total 482,000 units in 2019, a 5% increase from the five-year low recorded in 2018. This is an upward revision of 19,000 transactions from CREA’s previous forecast and represents a return their ten-year annual average. “It also remains well below the annual record set in 2016, when almost 540,000 homes traded hands. Notwithstanding the upward revision, the forecast for 2019 on a per capita basis remains the second weakest since 2001,” the forecast said.
B.C. will take the biggest hit, with sales falling 5.4% this year. Alberta, Saskatchewan and Newfoundland & Labrador are all forecast to come in at or near multi-year lows in 2019. By contrast, Manitoba, Quebec and New Brunswick are expected to set new annual sales records. Activity in Ontario is forecast to be in line with the 10-year average for the province.
CREA still maintains the national average price will stabilise this year, though with a small 0.5% increase instead of the previously forecast 0.6% decline. It is projected to come in at $491,000 nationally although it is expected to fall in B.C., Alberta, Saskatchewan as well as Newfoundland & Labrador while rising in Ontario, Quebec and the Maritimes.
In 2020, national home sales are forecast to rise by 7.5% to 518,100 units next year, with most of this increase reflecting a weak start to 2019 rather than a significant change in sales trends out to the end of next year. Sales in B.C. are expected to return to their ten-year average, gaining 14.3% on a year-over-year basis.
Ontario and Quebec are predicted to see sales rise by about 7% in 2020, while activity in Alberta will recover by about 5% compared to 2019. The number of homes trading hands in other provinces is predicted to edge up or down only marginally.
The national average price is forecast to advance by 2.1% in 2020 to $501,400 – still below the record set in 2017. CREA believes average price trends across the country will be more moderate versions of those in 2019, with small declines in Alberta, Saskatchewan and Newfoundland & Labrador with modest gains in Ontario, Quebec and the Maritimes. In B.C., the average price is expected to stabilise following this year’s decline.