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.
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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