CMHC stands by its pessimistic home price forecast

CMHC stands by its pessimistic home price forecast

CMHC stands by its pessimistic home price forecast

Canada Mortgage and Housing Corporation said that it is maintaining its less-than-rosy predictions regarding home prices, which it said will likely suffer a decline of 9% to 18% this year because of the manifold impacts of COVID-19.

“When I say I stand by our forecasts, it’s really with respect to what are the broad trends we expect moving forward,” said Bob Dugan, chief economist at CMHC. “When I look at the housing market there are a tremendous number of risks.”

The Crown corporation has forecasted prices to fall to $460,292 during the first quarter of 2021. For perspective, the average price last month as reported by the Canadian Real Estate Association was $586,000 – translating to a 21% drop from August 2020 to March 2021.

Not even the recent surge in demand would be enough to stave off this decline, Dugan said.

“I’m not convinced that we have a sustainable basis for housing demand in the economic disturbance that’s going on related to COVID-19,” Dugan told BNN Bloomberg. “That’s why I say I stand by the forecasts.”

This is despite sales seeing gains for the fourth consecutive month with the 6.2% increase in August. Activity was 33.5% stronger on an annual basis, CREA data indicated.

“Now if I’m wrong on the timing of trough, that could happen, but I certainly believe in the overall trend that there’s scope for price declines, for weaker demand and after that resolves itself eventually a recovery once we have a vaccine in place,” Dugan said.