CREA revises 2023 sales forecast

OTTAWA – The existing home market, a key driver of retail furniture and appliance sales, will continue to be challenged in 2023 before rebounding next year, according to the latest forecast from the Canadian Real Estate Association (CREA).

The realtors’ group noted national sales activity through its Multiple Listing Service (MLS) has remained little changed from month to month since last summer and, in fact, posted modest back-to-back monthly gains in February and March 2023. This leads CREA to posit that “with nearly a year without any large declines, the downward adjustment to sales activity from rising interest rates and high uncertainty looks to be in the rear-view mirror.

“Some buyers are expected to emerge back into the housing market, after waiting on the sidelines for added certainty around mortgage payments and property value – two important signals that could be here,” the forecast continued, adding, “First was the Bank of Canada indicating a pause, likely a top, for interest rates in January 2023, followed by meetings in March and April where they did not raise the overnight rate. And second, as housing markets have been tightening to begin the year, it looks as though home prices, which had been declining steadily since last March, have also now levelled out.”

However, they pointed out that a worsening of Canada’s housing supply remains a real possibility, especially as new listings have been dropping and are currently at a 20-year low – which could simultaneously drive sales down and average prices up.

CREA also is concerned that an expected short and mild recession in the middles of 2023 could turn out to be more severe and longer lasting than anticipated.

The association is forecasting some 492,674 properties will trade hands via its MLS in 2023, a 1.1% decline from 2022 and well below the record 666,390 units sold in 2021. This was almost unchanged from the national forecast published in January, although under the surface there were two notable offsetting revisions: Alberta home sales were revised lower because of a weaker than expected first quarter; and Ontario home sales were revised higher on a somewhat stronger than expected first quarter.

“Such revisions have larger affects on annual numbers when they occur in the first quarter of the year as they can alter forecast values for all three remaining quarters of forecast data,” the forecast said.

Unit sales in 2023 are forecast to fall in every province, except Ontario and British Columbia.

The national average home price is forecast to decline 4.8% on an annual basis to $670,389 in 2023. This is up about $8,000 from CREA’s previous forecast owing to a compositional boost in the first quarter of 2023 from outsized gains in the pricey regions of B.C.’s Lower Mainland and the Greater Toronto Area.

Prices are expected to fall in every province from coast to coast except Prince Edward Island, where are forecast to gain a modest 2.1%.

National home sales are forecast to rise 13.9% to 561,090 units in 2024 as housing markets continue to return towards trend, and monetary policy moves towards a more neutral stance. This forecast would still leave activity well below the 2021 record, but it would lift it back in line with the long-term trend and place it back above the 10-year average. The biggest jumps will be seen in B.C., Saskatchewan, Ontario and Nova Scotia.

The national average home price is forecast to recover by 4.7% from 2023 to 2024 to around $702,200, putting it on par with 2022. Bucking the price trend will be Manitoba and Quebec, where prices are predicted to fall slightly next year.

A few years ago, a study published by CREA suggested every home sale generated approximately $7,000 in furniture and appliance purchases in the 36 months following its completion – roughly $3.2 billion this year alone.

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