Canadian real estate just got one of the cooler forecasts this year, and it was from the industry. The Canadian Real Estate Association (CREA) updated its 2021 forecast this week. The organization made an upwards revision to the rate of growth for the average sale price this year. It sounds great, until you realize one detail most missed — prices are currently higher. Combined with a downwards revision of sales this year, they see activity cooling. Surprisingly, without any policy intervention, or shock.
Canadian Real Estate Prices Forecast To Rise 19%
Existing home sale prices are forecast to be much higher than last year, said CREA. The average sale price is expected to rise to $677,774 in 2021, up 19.3% from last year. The industry hiked the rate of growth by 2.8 points from their March forecast. The upwards revision to the average sale price came with a lower forecast for home sales.
Canadian Real Estate Price Forecast
The forecast for the average sale price of Canadian real estate in 2021 and 2022. Included is the March (previous) and June (current) forecast for contrast, as well as May YTD (actual) numbers.
Source: CREA; Better Dwelling.
The 19% rate of growth for home prices made a big splash in the media, but many missed a big point. The current rate of growth year-to-date (YTD) is over 30% for the average sale price. It came in at an average sale price of $686,491 for May YTD. Basically, the forecast shows the average price falling by 1.27% by the end of the year. This implies the second half of the year would be a lot cooler than the first half. Something we’re already seeing signs of, with falling existing home sales activity.
This Year Borrowed Growth From Next Year, Which Is Expected to Be Flat
CREA wasn’t just being flippant with the upwards revision of the average price this year. They see this year’s record activity actually borrowing some of next year’s growth. The average sale price is forecast to rise to $681,515 in 2022, up 0.6% from the forecast for this year. The rate of growth is 1.5 points lower than they had forecast in March. More than a little surprising to see a forecast with a smaller than inflation increase.
Canadian Real Estate Price Forecast
The forecast for the average sale price of Canadian real estate in 2021 and 2022. Included is the March (previous) and June (current) forecast for contrast, as well as May YTD (actual) numbers.
Source: CREA; Better Dwelling.
For those that didn’t catch it, next year’s numbers are forecast to be lower than the most recent numbers. The 2022 average sale price forecast is 0.72% lower than the YTD number for average home sale prices. The industry said they see things cooling later this year, but few probably expected this. Especially considering the industry tends to forecast to the upside.
Canadian residential real estate prices have soared throughout the pandemic. Expectations amongst economists, both in the industry and independent, see things cooling though. Most people were surprised to see CREA revise their growth higher, but didn’t realize most of it was baked in. They’re also following up this increase with absolutely minimal growth next year. This implies a lot of the activity this year has been pulled-forward — the desired effect of lowering interest rates.
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The budgets are pushed to the Max. I don’t know how anyone thinks this clown show can continue at these levels.
CREA. LOL!
They put a nice spin on those numbers. The MSM ran it as prices will grow 19%, not explaining the actual dollar value. Up 31% today.
Canadian Real Estate Association (CREA) is the biggest ponzi scheme in Canada.
~ Oh Canada our homes are in the biggest housing bubble
Good catch, Better Dwelling!
CREA always does this. They always try to present the data in a way that shows the market is hot and will be hotter and the best time to buy was Yesterday!
CREA forecasts are not to be taken seriously, not more seriously than horoscopes.
Real estate is purchased mainly on emotions. FOMO is the most powerful one, and CREA has developed and refined the technique of stoking it to the max.
There is no true methodical way to quantify the impact of emotion on the decision making, and so they make up predictions, and call it a forecast.
As of yet, they have never forecast previous crashes, and so it’s in keeping with consistency they are not forecasting the crash that is coming.