Expectations from Canada’s largest real estate bulls are crashing. The Canadian Real Estate Association (CREA), the organization that oversees Realtors, released its latest quarterly forecast for home prices in 2023. Most markets are now forecast to see home prices contract this year, but that’s not the biggest takeaway. Expectations from the industry rapidly collapsed as the market changed, showing just how big the swing in narrative around Canada’s real estate prices has been over the past year.
Canadian Real Estate Prices Get A Major Downward Revision In 2023
The industry’s forecast for Canadian real estate prices got a major downward revision. Home prices are forecast to have an average sale price of $662,103 in 2023, down 5.9% (-$41,513) from last year. Not the largest decline, but still a forecast contraction of home prices. That’s a big difference from where the industry was just a few months ago.
Just in September, the quarterly forecast didn’t expect a contraction at all in 2023. Since then, the forecast has fallen 8.3% (-$59,711)—a rapid change in perspective. The swing didn’t just suddenly occur though, the industry was completely blindsided by how quickly buyer sentiment collapsed after interest rate hikes.
Canada’s Real Estate Industry’s Expectations Are Plummeting
CREA housing forecast for the average sale price in 2023, as stated in its March 2022, Sep 2022, and January 2023 reports.
Source: CREA; Better Dwelling.
How rapidly did that change throughout the year? Since the start of last year, CREA’s national forecast has come down 18.4% (-$148,831) for 2023. A huge adjustment from what they saw before interest rates started to rise, and now. Don’t be surprised if the forecast continues to come down as the year progresses, or if recession appears.
Ontario Real Estate Forecast Dropped Over 24% From Last Year
Ontario is expected to see the largest price correction, which makes sense since it saw the biggest boom. Ontario’s average sale price is forecast to fall to $850,876 in 2023, down 8.7% (-$81,080) from last year. The forecast is 9.8% (-$92,183) lower than they had anticipated in September. Since the start of last year, Ontario’s 2023 forecast has pulled back 24.2% (-$274,698). Can expectations crash? Because if so, the more than twenty point drop fits the definition of a crash.
BC Home Price Forecasts Are Coming Down Fast Too
British Columbia (BC) was previously forecast to see the largest correction, but it’s seen doing better than Ontario now. The average sale price is forecast to fall to $926,705 in 2023, down 7.0% (-$69,752) from the previous year. The forecast is 7.3% (-$72,461) lower than expectations in September. Since the start of last year, the forecast has come down 13.0% (-$138,935). A large adjustment of expectations.
Canadian Real Estate Price Forecast
CREA forecast (Jan 2023) for the average sale price of a home in 2023.
Source: CREA; Better Dwelling.
Alberta Real Estate Still Forecast To Grow, But Expectations Cooled
On the flip side of the declines is Alberta, where minor growth is enough to top the growth forecast. The average sale price is forecast to drop to $452,313 in 2023, up 1.1% (+$4,921) from the previous year. It’s a big change from September, with expectations pulling back 1.5% (-$7,120). The current forecast is 9.3% (-$46,528) lower than they had forecast at the start of last year.
It’s easy to think we’re highlighting how out of touch the industry is if you don’t understand forecasting. However, forecasts are expectations based on a snapshot of the current environment. They change as the market does as well. Over the past year, there’s been a lot of sudden changes.
Really, the big takeaway is how quickly expectations in a market can change. At the start of last year, few people believed home prices would only go up. It doesn’t matter how often it occurs, people will always think “this time is different.” Until it isn’t.