Canadian real estate is heating up, after a brief correction. Both prices and sales are up around most of the country—some markets rising by tens of thousands in May. Don’t expect it to last, warns a top economist. Oxford Economics warned clients they expect this to be a temporary boost, and the pullback for existing home prices is less than halfway to their forecast bottom.
The Canadian Real Estate Correction Hits Pause, and Sees Exuberance Return
Canada’s real estate markets have picked up recently. Seasonally adjusted existing home sales rose 5.1% in May, when compared to a month before. Unadjusted sales were 1.4% higher than the same time last year, despite buyers dealing with much higher interest rates.
Rising sales were generally seen across Canada, with the volume rising in 70% of markets. However, it’s worth emphasizing that existing home sales remain below the 10-year average.
The market resurgence might be a passing trend, according to some economists. “Canada’s resale housing market revival continued in May as home sales and prices rose once again last month,” says Tony Stillo, director of Canada Economics.
Though he adds, “However, we believe the spring housing upswing will fade this summer as interest rates rise further and expect a 10% drop in home prices by early next year.”
The Canadian Real Estate Correction Is Not Over, Warns A Top Economist
A brief dip in mortgage rates sent exuberant buyers panicking to get into the market. That’s helped send home prices 2.1`% higher in just one month, leaving them 12% below the record high in February 2022. For context, despite new housing supplies rising significantly faster than population growth, prices jumped 62% from December 2019 to peak.
Not much of a correction considering the increase, right? Stillo and his team don’t see this as the end of the correction, but just a brief pause before it continues.
“…we don’t think Canada’s house price correction is over,” Stillo bluntly argues. “There may be a flurry of sales before the Bank of Canada next rate decision in July. However, as interest rates move higher and Canada slips into recession, we expect weaker housing demand and higher listings will cause home prices to resume falling, resulting in an overall 20-25% peak-to-trough decline from the February 2022 high.”