CREA updated forecast says MLS sales will fall even further in 2022
OTTAWA – While the national average price will continue to climb, the Canadian Real Estate Association (CREA) expects the number of homes sold via its Multiple Listing Service (MLS) will fall 14.7% in 2022 over the record high set last year. They will decline another 2.8% next year.
The realtors’ group attributes the decline to one significant factor: “With interest rates on the rise, and with five-year fixed rates getting well out ahead of what the Bank of Canada is expected to do later this year, home sales have cooled sharply in recent months. Prices have also been halted in their tracks following a record setting five months of growth between October 2021 and February 2022.”
CREA goes on to note a critical element of the story has been the impact discounted five-year fixed mortgage interest rate levels have had on the stress test. In April 2022 alone, discounted five-year fixed rates increased from the low 3% range to the low 4% range. The stress test is the higher of 5.25% or the contract rate plus 2%. For fixed rate borrowers, qualifying for the stress test has moved from 5.25% to the low 6% range – close to a 1% increase. Variable rates will now be playing catch-up over the balance of 2022.
Some 568,288 properties are now forecast to trade hands via the MLS in 2022 – a decline of 14.7% from the 2021 record of 665,992 units but still the second-highest annual figure ever.
The association notes this was a considerable downward revision from the previous forecast of an 8.1% decline to 612,800 units published in March, a move its attributes to changing market conditions. Only Alberta and Newfoundland and Labrador are forecast to buck the trend of falling sales in 2022.
The national average home price is forecast to rise by 10.8% on an annual basis to $762,386 in 2022 – this is down from CREA’s previous forecast of $786,000. Price gains are forecast to be largest in the Maritime provinces, followed by Ontario and Quebec.
National home sales are forecast to edge back a further 2.8% to 552,403 units in 2023. The national average home price is forecast to rise by a modest 3.1% on an annual basis to $786,282 in 2023. Both are also down from the previous forecast, which put sales at 596,150 units in 2023 and the national average price of $811,000.
Although this figure hasn’t been updated in recent years, every home sale is believed to generate $6,500 worth of furniture, mattress and appliance (FMA) sales over the three years immediately after closing. That means, 2022 MLS sales should generate $3.7 billion in FMA sales over the next 36 months.
Simply put, housing sales account for roughly 30% of furniture store sales in any given year.
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