Canada

Canadian Real Estate Sales Are Falling Over Twice As Fast As Expected

Canadian Real Estate Sales Are Falling Over Twice As Fast As Expected

Canadian real estate prices and sales are making larger moves than analysts anticipated. In June, the Canadian Real Estate Association (CREA) updated their 2017 forecast with lower sales and higher real estate prices. We thought we’d check in to see how those numbers compare to the current market. Turns out in order for their forecast to make sense, sales would have to beat last year’s record numbers by a pretty big margin.

CREA Forecasts A Decline of 1.5% For Sales

CREA forecasts lower sales this year, compared to last year’s numbers. 2016 ended with 535,489 sales, a 6.4% increase from the year before. CREA estimates this year we’ll see 527,400 sales, a 1.5% decline compared to 2016. This a modest decline, considering Canada is following up one of the best sales years in history.

Sales Are Down 4% Year To Date

Year-to-date (YTD), those numbers underestimate the decline. In 2016, from January to July, there were 316,740 sales. This year we’re at 304,187 sales, 3.96% lower than the year before. This is more than twice the rate of decline anticipated. The forecast is from June, so CREA is anticipating sales to rapidly increase in the second half.

Source: CREA, Better Dwelling.

To put that in perspective, last year was one of the best years for sales on record. In order to get to their estimate, the back half of this year would have to beat that by 2%. You can decide if that’s realistic yourself.

Actual national sales from August to December in 2016, vs the sales forecasted for the remainer of 2017. Source: CREA, Better Dwelling.

Prices Need To Rise 2.5% Monthly… In Every Market To Hit Forecast

CREA is much more optimistic on real estate prices than buyers it appears. CREA estimates the average sale prices in 2017 will end around the $526,000 mark. Currently the average price is at $478,496, 9% lower. To get closer to CREA’s forecast, prices would have to rise almost 10% over the next 4 months. A price increase of 2.5% per month is extremely ambitious. Considering a 3% annual increase is considered a good return in most markets.

Source: CREA.

Before we rag on CREA economists, remember that we’re only mid-year. Sales could speed up and prices could rocket higher going forward. Odds are stacked against it, but it could happen.

This really does highlight how out of touch with reality real estate is in the country. Sales are declining across Canada at more than twice the rate anticipated, and prices are falling. Yet the national agency is forecasting sales will beat record months, and prices will increase at 5 times the rate of inflation in 4 months? Sure it will.

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9 Comments

  • Reply
    Justin Thyme 4 weeks ago

    How about an article on buyers who are now backing out of deals, demanding the seller settle for a much lower price than negotiated?

    And the legal argument on who gets the deposit – does it go to the seller, or revert back to the buyer?

    In Toronto proper, apparently prices are dropping more than the deposit, in long closings. Better to forego the deposit, and buy cheaper.

  • Reply
    Authentic 4 weeks ago

    Yes, Real Estate Agents might, and will, as they are planning to do – Simulate and Increase the prices again this Autumn. This is their bread.

    The buyer is the one who has to stay calm at this time… Thoroughly think before paying that amount, the amount that the house is not even 2\4 worth.

    The buyer – It’s all in your hands!

    • Reply
      Dan Duran 4 weeks ago

      Have you bothered to actually look at the facts? Averages in Toronto are falling because many more condos are selling vs detached. And prices for condos are going up. Detached homes under 2 million are in VERY short supply, so you can keep calm or not, it doesn’t change the fact that listings are dropping fast.

      • Reply
        BB 4 weeks ago

        LOL … we pass the peak in April and since then the market is in a downward trend especially for single detached housing. The average Toronto home prices are down nearly 19 percent with no signs of a slowdown. Good luck with judging the market based on 2 million + inventory.

      • Reply
        Garfield 4 weeks ago

        Go to bottom of Zolo Market Stats page. Median Toronto house (detached) price has cratered from $1.3M in April to under $900k in August.

        https://www.zolo.ca/toronto-real-estate/trends

        • Reply
          Tommy 4 weeks ago

          Lol that’s the usual seasonal pattern. Happens every year from spring (high price season) to summer (low price season).

      • Reply
        Jonathan 4 weeks ago

        Listings are dropping in large part because sellers are de-listing after failing to sell their home in July.

        Most home owners don’t want to sell their home during the summer with vacations and all, and buyers don’t really want to buy in November/December/early Jan because its snow makes homes and driving around home shopping, less appealing.

        Sellers will want to sell in September. Obviously buyers are holding right now either due to prices or simply they no longer qualify for the amounts they previously did. Not only that buyers might be fighting with their lenders about the home’s value.

        So either fewer homes will now need to sell moving forward at the current price, or home prices will need to drop. Honestly Toronto is a nice city but it is a working city. It’s not where the rich go to live. If they have made their wealth here, then they’ll stay. But it’s not attracting rich foreigners in large numbers.

        So incomes are required to support the Toronto market. Interest payments make early years of home ownership much less right now. But high prices and low inflation will make current home prices very punitive in their 20th+ years. Demographics are not that supportive of higher prices.

        Assets have a price, not just a payment. In a bull market you are more likely to just look at a payment, including the bank, but during a bear market it’s the total potential loss on your home that you fear. So the price of the asset becomes much more relevant. Buyers can see that homes are 12x income, which is one of the highest in the world. There’s not much supporting that other than low interest rates.

        My fear is that young families are currently indebting themselves, then in the 2020’s we have massive increases in health, more retirees selling, home prices falling, and interest rates rising slightly. Canada will borrow trillions to fill the gap, and our economy will be plagued just as Japan’s is, until lenders stop lending to us. What future do our children have with this current plan?

  • Reply
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