Canada’s real estate industry is lowering expectations for the market going forward. The Canadian Real Estate Association (CREA) revised its home sales forecast lower for the remainder of the year. They also see 2024 being slower than previously anticipated, as demand slows without central bank stimulus.
Canada’s Real Estate Industry Revises 2023 Sales Lower
Expectations for existing home sales continue to fall. CREA’s latest forecast shows a 6.8% drop to 464,000 homes sold by year-end. A drop was expected, but the latest forecast update is nearly 30,000 sales lower than expected 3-months ago. Demand remains close to historical volume, but just isn’t picking up as the industry had hoped.
Canadian Real Estate Slowdown Expected To Continue Next Year
Home sales are forecast to grow further next year, but it also got a downward revision. Sales are forecast to climb 11.2% to 516,000 homes in 2024. Once again, this was a downward revision of 45,000 units from the forecast 3-months prior.
Canadian Real Estate Sales Forecast
CREA Expects 75,000 Fewer Sales Than They Did 3 Months Ago
Together, the downward revision reveals how rapidly the industry’s view of the market is changing. The latest forecast drops combined 75,000 home sales, a big shift that reveals higher interest rates are helping to temper excess demand.
Yes, excess demand. Canada’s central bank used record low rates, and quantitative ease, to intentionally stimulate housing demand. It may have been justified in 2020, but traditionally stimulus isn’t used when record demand is present. Roughly 250,000 excess home sales were driven by the stimulus in Canada. Even the BIS, the central bank for central banks, attributed rapid home price growth to keeping rates too low for too long, driving excess demand.
Higher rates are reducing home sales, and CREA is slowly coming to that realization. While it appears that higher rates are penalizing sales, the downward revision mostly just brings sales back to typical levels.