Canadian consumers are lowering their expectations for home price gains. The Bank of Canada (BoC) released its Q3 2021 Survey of Consumer Expectations. One key takeaway from the survey is the household forecast of home price growth. The latest survey shows consumers lowered their expectations for how much prices will rise over the next year. Since cooling expectations can precede cooling price growth, this might be an indicator worth paying attention to.
Canadian Consumers Expect Lower Price Growth
Canadian households still have lofty expectations for future home price growth. Those expectations are cooling fast though. The median annual forecast fell to 5.3% in Q3 2021, down from 5.7% in the previous quarter. Expectations are still above survey data prior to 2021, but they’re down from the record high. Consumer expectations shifting typically involves a catalyst. It’s unclear what that catalyst is here, other than home prices are expensive.
Canadian Consumer Home Price Forecast
The median forecast for annual home price growth from the Bank of Canada’s Survey of Consumer Expectations.
Source: Bank of Canada; Better Dwelling.
Ontario Consumers Lowered Home Price Growth Expectations
Ontario consumers also tapered their expectations of annual growth for home prices. The median forecast in Q3 2021 fell to 5.62%, down from 6.96% the previous quarter. This is lower than pre-pandemic expectations, which is a bit of a surprise for such a high growth market.
BC Consumers Still Expect Lofty Home Price Growth
British Columbia (BC) consumers see huge annual home price growth, despite lowering expectations. The median annual forecast fell to 6.0% in Q3 2021, down from 6.5% in the previous quarter. It hasn’t quite fallen to pre-pandemic levels, but it’s much lower than the bags of cash consumers saw in 2016. They were hockey bags, for those with inquisitive minds.
Canadian Consumer Home Price Forecast
The median forecast for annual home price growth from the Bank of Canada’s Survey of Consumer Expectations.
Source: Bank of Canada; Better Dwelling.
Quebec Consumers Made A Sharp Decline In Their Home Price Expectations
Quebec consumers demonstrated the sharpest drop in expectations for home price growth. The median annual forecast fell to 5.4% in Q3 2021, down from 8.6% in the previous quarter. Dropping over 4 points is strange, especially for a region with such fast growing home prices. Even with the drop, the forecast is above pre-pandemic expectations.
Canadian households still see large home price gains over the next year. However, their expectations have begun to taper, which is a little odd. Home sales have fallen, but few other indicators have shown signs of weakness. Inventory has been tightening so much, higher home price expectations would be the typical implication. Yet households are tapering their forecasts, with little reason other than prices are very high.
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When most home owners consistently start selling for less than the comparables for months on end then the prices will drop.
Kind of a long shot
That would make sense if people sold their house month to month. In reality you’re looking at a 5-year (or more term). Would a seller who made 100% care if prices drop 10% over three months? No, they aren’t hurting. They have no problem.
It’s the person that bought a month ago, and has no idea if they’ll need to top up their mortgage that suffers the issue.